Vietnamese banks report plunge in profits
In this article (5)
While profit across the banking sector grew by an estimated 40 percent last year, VietinBank, LienVietPostBank and SaigonBank have reported steep declines. The biggest surprise came from state-owned VietinBank, the country’s second biggest lender by assets, which reported a 25 percent fall in profits before tax to go out of the group of five most profitable banks in the country.
Le Duc Tho, its chairman, said this was a result of having to restrict operations last quarter to begin restructuring.
Asset growth, credit growth and capital mobilization grew by 6-10 percent, lower than targeted.
LienVietPostBank reported a 30 percent decline in profit before tax as a result of losses related to securities investments and low marginal interest rates.
It achieved losses of nearly VND5 billion ($215,140) from securities investments whereas in 2017 it had made a profit of VND380 billion ($16.35 million).
SaigonBank’s profit before tax fell by more than 26 percent due to provisioning for bad debts. The bank had to increase provision for bad debts by 22 percent to an amount equivalent to 87 percent of its profit from business operations.
Its bad debts doubled in the first half of 2018 to nearly VND900 billion ($38.72 million), but by the end of the year it brought the rate down from 6.48 percent during mid-year to 2.2 percent. It involved provisioning of VND287 billion ($12.35 million).
HSBC Vietnam CEO Pham Hong Hai said from 2019 bad debts could reemerge as a problem for banks after the recent lending spurt and the instability of the global financial markets.
As a result, banks’ profits would most likely see a downward trend this year, he warned.
The State Bank of Vietnam targets credit growth of 14 percent this year, the same as last year, and keeping non-performing loans to below 2 percent.
Questions & Answers
Q.What caused VietinBank's profits to fall so significantly?
What caused VietinBank's profits to fall so significantly?
VietinBank's chairman stated the decline was due to restrictions on operations in the last quarter. This was necessary to begin a restructuring process within the bank.
Q.Why did LienVietPostBank experience a decline in its profit before tax?
Why did LienVietPostBank experience a decline in its profit before tax?
LienVietPostBank's profit decline resulted from losses in securities investments and low marginal interest rates. The bank lost nearly VND5 billion from securities, contrasting with a profit the previous year.
Q.What was the main reason for SaigonBank's fall in profit?
What was the main reason for SaigonBank's fall in profit?
SaigonBank's profit dropped due to increased provisioning for bad debts. The bank had to raise its provisions by 22 percent, equivalent to 87 percent of its profit from business operations.
Q.What is the forecast for banks' profits this year?
What is the forecast for banks' profits this year?
HSBC Vietnam CEO Pham Hong Hai warned that banks' profits would most likely see a downward trend this year. This is due to potential re-emergence of bad debts and instability in global financial markets.