Vietnam - Banks’ profit undermined by securities investment losses

The year 2011 proved to be a difficult year for banks as majority of them announced lower profits in comparison to last year. However, the actual profitability of many large banks remains stable.

Stable profitability despite losses from securities investment

MBB announced the Q4/2011 results of the parent bank. Accordingly, net profits reached more than 1.64 trillion dong, up 67% over the same period last year, bringing the cumulative profit in 2011 to nearly 5.4 trillion dong, up 59% compared to 2010. Of course, this number should be higher because this bank suffered a loss of over 150 billion dong from securities trade in Q4/2011 and 530 billion dong for the whole year 2011 (3.5 times over the same period of 2010). It also posted foreign exchange losses in 2011 at 114 billion dong. Income from other investments fell sharply in Q4/2011.

In Q4/2011, ACB gained net profit of 1.092 trillion dong, and 2011 accumulated profit of nearly 3.194 trillion dong, up sharply compared with 2.622 trillion dong in 2010. But this bank also suffered a loss of 214 billion dong from securities trading in the fourth quarter and 117.56 billion dong loss for the whole year 2011.

In Vietinbank, the situation was similar to the two aforementioned banks. In Q4/2011, CTG's net interest income reached 5.224 billion dong, up 41% over the same period in 2010, but its foreign exchange and securities investment lost 14.7 billion and 71 billion dong respectively. Other operating profits despite gaining nearly 293 billion dong were down 67% over the same period of the previous year. Profit before tax in 2011 of CTG was estimated at 8.5 trillion dong.

CEO of a loss-making bank in financial investment said that losses from securities trading were blamed for the stock market declines. However, his banks made adequate provisions for risk and hoped the stock market would recover in 2012 to make profits, and in the worst case, the bank would cut losses.

However, according to a banker, the hundreds, thousands of billion dong of profits announced seem large in absolute value, but the rate of return on assets and equity is not high. Meanwhile, the risks of the system safety still appear.

Opportunities in 2012

Talking to Dau Tu Chung Khoan newspaper, general manager of a bank shared that in 2012, macro-economic outlook is said to be more difficult, so the central bank and the government still must maintain tight monetary policy. However, this is also an opportunity for banks to reform and renew themselves, operating with trading standards and risk management at a higher level, creating a foundation for sustainable development in the future. The difficulty is always a chance; someone "smart" still finds a good direction for himself.

"It is expected that 2012 earnings growth of the bank will be about 30% compared to 2011. Specifically, to reach 3.6 trillion dong compared with 2.8 trillion dong in 2011 ", the leader said.

Mr. Ha Van Tham, Chairman of Ocean Bank acknowledged, 2012 remains a difficult year for the banking system, but there is not no way out, because if a bank retains good governance, it will still gain profit growth. Besides, the profit not only comes from credit activities, but also from the development of networks, services, products and others.

Therefore, banks will certainly have strategic moves. In particular, 2012 will be the year of the classification made in the banking system. These small, difficult banks will find ways to survive; medium banks both consolidates and find ways to develop with certainty, while big banks do not focus on growth and expansion, they should focus on in-depth development.

"Although Ocean Bank is still awaiting decisions from the central bank to allocate credit growth targets in 2012 to submit to the general shareholder meeting to pass the business plan for 2012, but it is expected that Ocean Bank will grow in the range of 15-20 %," Tham said.

Trinh Van Tuan, general director of Orient Commercial Bank (OCB), the operation as well as the development of the financial sector in 2012 will be more favourable than in 2011, because all the identified difficulties ahead should not be a surprise. This is different from last year that banks were exciting in operations but unexpectedly faced with difficulties. Tuan said that OCB is expected to grow 20% in 2012.

VietBiz24

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