Profits give banks the flip flops

For example, DaiA Bank reaped VND105 billion ($5 million) pre-tax profits in the first quarter of 2012  against its full-year VND650 billion ($30.9 million) target, according to the bank executive.

Similarly, Oriental Commercial Bank (OCB) earned VND100 billion ($4.7 million) in first quarter profits against a VND550 billion ($26.2 million) projection.

NamA Bank has set a VND600 billion ($28.5 million) in profits for 2012 with the bank’s chairwoman Nguyen Thi Xuan Loan said the profit target must be set based on actual market conditions, but not expectations.

Bigger players also face pressures in materialising 2012 profit targets in the context of more contained credit growth compared to 2011.

In the first quarter of 2012, Vietcombank (VCB) as a parent company raked in VND1,291 billion ($61.4 million) profits. Its net profit before making loan loss provisions exceeded VND2,612 billion ($124.3 million), surging 20.1 per cent on-year. However, since it contributed VND950 billion ($45.2 million) to make loan loss provisions its first quarter profits experienced a 3.34 per cent decline against 2011’s corresponding period.

This year, VCB set forth a full year pre-tax profit target of VND6,590 billion ($313.8 million), up 15 per cent on-year and a 12 per cent dividend rate. To make these goals come true, the bank needed to achieve 18 per cent deposit growth and 17 per cent credit growth, said its chairman Nguyen Hoa Binh.

As with ACB, net incomes from interest accounted for 70 per cent of the bank’s profits, the remaining 30 per cent profits came from services (20 per cent) and gold and foreign currencies trading (10 per cent), said its general director Ly Xuan Hai.

ACB expects to witness improvements in outstanding loan balances in the coming period when more affordable lending rates lead to credit expansion.

In fact, 70-90 per cent of bank profits come from lending activities, particularly to banks of smaller size. Besides, banks’ chartered capital had increased over previous years with growing pressures from dividend payments becoming stronger with banks struggling to realise profit targets.