Banks prudent in 2014 profit targets

In the past banks’ general shareholder meetings would adjourn and announce profit goals and other numbers 20-40 per cent up against the previous year.

But things are different this year with scores of banks anticipating lower credit indexes compared to last year as their key issue is controlling bad debts.

Eximbank just unveiled their Board of Directors’ Resolution with major business indexes for 2014.

Accordingly, this year the bank said it expects a 21 per cent jump in deposits and 23 per cent increase in lending with pretax profits forecasted at VND1.8 trillion ($85.7 million).

It also said it plans to keep its bad debts at around 3 per cent and dividend at 8.5 per cent.

Compared to 2013, the bank’s profit expectations this year are actually halved as bank executives admit they are looking at a difficult year; some even said the figure was still too high.

Bank leaders have argued that the meager 1.5-2 per cent disparity between deposit and lending rates is only enough to cover operating costs.

Last year, despite an 11 per cent credit increase against 2012, the bank only realised 31 per cent of its annual profit goal. It earned VND2.736 trillion ($130 million) in net profits, 44 per cent down against the previous year.

In another case, although Ho Chi Minh City-based Sacombank achieved its full-year pretax profit target of VND2.8 trillion ($133 million) and eyed 13 per cent credit growth last year, it was very prudent with its profit target.

The lender set a pretax profit goal of VND3 trillion ($143 million), only slightly up against last year.

“We came to this number after careful consideration as we realised it was unlikely to achieve high profits in the current context,” said Sacombank chairman Pham Huu Phu.

DongA Bank dropped its pretax profit target of VND1 trillion ($47.6 million) and only saw limited credit growth last year, and so was mulling very modest targets for 2014.

“It is essentially necessary to reduce our profit targets and while DongA Bank is among the top players with our high service quality and numerous card holders, we have to be cautious in our financial expectations for the year,” said the bank’s general director Tran Phuong Binh.

State giant Bank for Investment and Development of Vietnam (BIDV) has released a reasonable pretax profit goal of VND6 trillion ($285 million) for this year and bad debt rate of below 2.6 per cent, though last year it saw an increase of 23 per cent to more than VND4 trillion ($190 million) in post-tax profit.

Other state giant Vietcombank was also careful in its profit targets despite reaching VND5.7 trillion ($272 million) in 2013.

From 2008 to now, these banks had presented dwindling year-on-year profit goals amid a highly challenging business climate.