Where do profits come from?
Tien Phong Bank has reported the pre-tax profit of 376 billion dong by the end of November 2011, while having predicted that the profit to be gained in 2011 would be higher by 140 percent than that of 2010.
Tran Thanh Hoa, General Director of ABBank has revealed that the pretax profit of the bank had reached 391.3 billion dong, while the bank earlier this year planned to obtain 500 billion dong in profit.
Meanwhile, Sacombank has reported the fat profit of 2618 billion dong by the end of November, fulfilling of 97 percent of the yearly plan.
Prior to that, the eight banks which list their shares at the Hanoi and HCM City bourses had reported the business result for the third quarter of the year. Vietinabnk led the banks in terms of post tax profit with 4129 billion dong, followed by Vietcombank 3309 billion dong, ACB 2101 billion dong and Eximbank 2028 billion dong.
Meanwhile, Military Bank’s General Director Le Cong said on the sideline of a recent conference that by the end of the second quarter, the bank had obtained the profit of 2160 billion dong and the low bad debt ratio of 1.9 percent.
The year 2011 would finish in just 20 days and it is obvious that a lot of commercial banks will fulfill the yearly business plan. However, a lot of other banks have anticipated the minus profits this year.
The unprofitable banks reportedly used short term mobilized capital for long term loans, and have overly high percentage of loans provided to the real estate sector. Meanwhile, the real estate market remains gloomy with very few transactions, which has made borrowers unable to pay bank debts.
Regarding the structure of the profits, bankers say credit remains the main source of income of banks. A member of a board of directors of a big bank said that the bank has an “abundant crop” in 2011, because the bank has profuse capital, while other banks seriously lack capital.
He said that the bank has earned a lot of money by lending in the interbank market, where the interest rate sometimes reached 30 percent per annum, when small banks rushed to borrow money to improve their liquidity.
Foreign currency trading has also brought fat profits to some banks which have advantages in the field, such as Eximbank or Vietcombank. Director of an exchange said that the net profit from foreign currency trade of the bank alone has reached 700-800 billion dong.
Besides, big banks have also earned money from the services of remittance, payment service, overseas remittance and other services.
Banks criticized of living comfortably on businesses
Replying to the comments by the business circle that banks have earned much money by setting up overly high lending interest rates on businesses, an official of the State Bank of Vietnam said that trillions of dong worth of profit of banks could be a big sum of money, but the banks’ profit would not be big if comparing with their assets.
The prices of bank shares are now just at the above average levels, while the market prices of some bank shares are just a little above the face value of 10,000 dong per share. Even the banks with the profit of trillions of dong also have the low market share prices.
A banker has pointed out that banks’ profits are not big if comparing their huge assets. Techcombank, for example, has the pretax profit of 1500 billion dong in the first half of 2011, while its total assets are 177 trillion dong. He said that the ROE (return on equity) of Vietnamese banks in 2010 was less than 20 percent, which was equal to the average ROE of medium class banks in the world that IMF showed in 2009.
While the ROE of the top banks in the first six months of the year was less than 25 percent, the ROEs of the enterprises in other business fields were much higher. VIC, for example, had the ratio at 44 percent, VNM 48.3 percent, MSN 34.4 percent.
Source: Tien phong
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