Vietnam - Banks believed to make fat profit with ATMs, though reporting loss

VietNamNet Bridge – While commercial banks have been insisting on charging fees on the clients’ ATM transactions to cover the investment capital and operation expenses, analysts have pointed out that even if banks do not collect fees, they still can make fat profits with ATMs.

The reports by the State Bank of Vietnam and the Vietnam Card Association released recently showed that by the end of June 2012, Vietnam had had 37.7 million personal payment accounts with ATM cards.

Ninety percent of the 37.7 million were domestic payment cards with 70 trillion dong kept in the accounts. Especially, this was a huge low-cost capital, for which banks just had to pay 2 percent per annum in interest rates.

If the sum of 70 trillion dong had been deposited at banks, which now pay the interest rate of 9 percent per annum, the sum of money would bring the interests of 4900 billion dong. This means the colossal profit of 4900 billion dong has been pocketed by commercial banks.

If noting that there are 13,920 ATMs nationwide, one would see that banks can make the profit of 350 million dong a year from every ATM.

Besides, banks can also charge fees on inter-network transactions (the card holders of A bank make transactions with the ATM of B bank). There has been no official report about the number of inter-network transactions. However, it was estimated that 130 million transactions had been made by June 2012 with the total value of 200 trillion dong. This means that banks could also earn big money from the transaction fees.

Currently, banks charge 3300 dong for every inter-network cash withdrawal transaction, 1650 dong for every account checking. Besides, they also collect annual fees to maintain the accounts.

However, commercial banks still have claimed loss and insisted on the permission to charge fees on inner-network transactions from 2013. The State Bank of Vietnam has turned the green light on the banks’ plan to collect fees, telling commercial banks to build up the fee collection plans and submit to the watchdog agency for approval.

Finance experts have rejected the information that banks are incurring losses, pointing out that banks have been making fat profits with their investments in ATMs.

Banks have to pay 17,000-20,000 to buy an ATM. If counting on other expenses, including the business premises rent, camera installation, they would have to pay 500 million dong in total in the initial investment for every ATM box.

If banks follow an accelerated depreciation method, the depreciation expenses would be 100 million dong. This means that banks would have 250 million dong in revenue left, a part of which would be paid to maintain the operation of ATM system. Experts have been certain that the profits banks can pocket are relatively high.

They said that one bank complains they incur losses with ATMs; this should be attributed to the bad management of the banks, not to the fee collecting mechanism.

With 8.4 million cards, Agribank has the turnover at 122 trillion dong from card holders, which is believed to be much higher than the total expenses the bank has to pay to maintain its 2100 ATMs nationwide.

Reports say VietinBank now has 1829 ATMs, while Vietcombank has 1700.

Commercial banks have run a lot of noisy promotion campaigns, offering a lot of preferences to card users in an effort to increase the number of clients. Therefore, the banks’ complain about loss is unreliable to people.

Compiled by Kim Chi

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