After a Haiphong-based branch of Vietnam’s Industrial and Commercial Bank (Incombank) made public a loss of US$940,000 (more than VND15 billion), many customers withdrew money and paused transactions with the bank. That caused a chain reaction, having a major impact on business results as well as the prestige of Incombank, one of four biggest State commercial banks in Vietnam. How did Incombank solve this problem?
Discover the cause of the loss
Under the circumstances, Incombank has appointed a working group to Haiphong to audit the whole business activities in 2005 and the first two months of 2006 of the Haiphong branch. The findings revealed that in 2005, one of seven branches of Haiphong Incombank had foreign currency transactions with several banks in Vietnam and made losses. According to Mr. Pham Huy Hung – Director General of Incombank, the cause of the loss is the change in exchange rates. However, the underlying reason is that people who carried out foresaw the situation wrongly. Such risks in business are not great, however, they can be a disaster if there are negative chain reactions, Hung emphasised.
The audit results showed that the branch had enough foreign currency trading contracts in transactions and transferred payments to other banks, which obeys standard requirements of a financial business activity. Mr. Pham Huy Hung affirmed: “There is no evidence of guilt, directly taking money from the bank by an individual”. It proves that Haiphong branch’s loss is not due to wrong or non-transparent transaction procedures
Only one out of one hundred and fifty branches
Overall, the said above branch of Incombank Haiphong is just one out of seven branches of Incombank in Haiphong city and one of a hundred and fifty directly run by Incombank nationwide. Incombank’s total assets accounts for more than 25 per cent of market share of the whole Vietnamese banking system.
Incombank’s financial results for the year 2005 and two first months of 2006 are encouraging: the 2005 capital resources increased by 18.2 per cent on year and the balance mobilised by February, 2006 reached VND101,238 billion (US$6.36 billion); investment loans grew by 14.7 per cent with balance of VND102,061 billion (US$6.4 billion) by the end of February, 2006. Thanks to coordination among commercial banks, maximising each other’s advantages in information, appraisal, management and monitoring skills, the quality of co-sponsored items is rather good.
Loans to individual and enterprises, working capital management and investment as well as investments on the interbank market amount to 28 per cent of total profitable assets. That displays Incombank’s high capacity in payment, avoiding long-term risks. Arrears collection has been well applied by Incombank, narrowing the arrears from nearly 28 per cent down to 3 per cent on the total remaining debts. With such business results, Incombank has deducted VND1,500 billion for possible risks and fulfilled the target assigned by inter-ministries with VND538 billion of profit. “A loss of VND15 billion accounts for just a very small percentage in the total property of the company, which can not affect potential or the long-term development strategy of Incombank. Therefore, Incombank’s partners can assuredly continue cooperating with the bank”, Hung emphasised.
Huong Ly
Vietnamese
