State-owned banks lead in employee efficiency

Nghiem Xuan Thanh, chairman of Vietcombank, claimed a consolidated after-tax profit of VND8.5 trillion ($375 million). Of all state-owned commercial banks, the number of staff in Vietcombank is the lowest (barely over 14,000) and the most efficient in turning profit: each individual make VND600 million ($26,514) on average in a year, which means VND50 million ($2,210) every month. This is also the reason why Vietcombank staff gets the most satisfying wages and benefit packages in the current banking sector.

With the profit of VND8.25 trillion ($365 million), VietinBank goes virtually head-to-head with Vietcombank, however, breaking it down amongst the 21,000 employees, Vietinbank’s profit per employee averages VND474 million ($21,000) a year and nearly VND40 million ($1,700) a month, .

Ranking third is BIDV. Thanks to its 24,000 employees, the bank turned VND7.5 trillion ($331 million) in profit in 2016, which means a contribution of VND312 million ($14,000) per employee throughout the year, or VND26 million ($1,150) per month.

The last one is Agribank, whose profit is over VND4 trillion ($17 million) made by a staff of 40,000, meaning that each worker makes VND100 million ($4,400) in profit a year, or VND8.3 million ($366) a month.

In the joint-stock commercial banking sector, many banks have yet to announce their profit, but the few figures announced so far show uneven productivity.

Up to this point, the highest profit was made by Military Commercial Joint Stock Bank (MB). In 2016, the bank’s pre-tax profit was VND3.711 trillion ($164 million), which means each employee made VND510 million ($22,536), or nearly VND43 million ($1,900) per month. VIB employees made VND14.6 million ($645) and VPBank about VND15 million ($662) per month.

At some banks currently undergoing restructuring, each employee only made a profit of VND2-3 million ($88-$132) per month. Overall, there are more than a dozen banks whose profit per employee is below VND10 million ($441) a month.

Of course, this figure is not an accurate depiction of the productivity of each specific employee in each bank, because these numbers summarise a lot of factors, especially the allowances for bad debt expenses, risk provisions, operating costs, etc. Not to mention some of these profit figures are unreliable. Many banks report high profit figures, but indeed, interest accruals are included and bad debts in the off-balance sheet are not counted yet.

Looking at the bad debts and the banks’ profits, it is clear that the most transparent data in the current banking system is provided by Vietcombank. By the end of 2016, this bank has bought up itsbad debts from Vietnam Asset Management Company (VAMC), putting all bad debt items in one ledger, no longer having liabilities in or off the balance sheet like other banks. The bank’s provisions for credit losses are also very high, up to 121 per cent of the bad debt volume.

In almost all other banks, although bad debts are now lower than three per cent (slightly over one per cent at some), there still exist thousands of billions of dong in bad debts that have not been handled (being at VAMC). In the years to come, when bad debts will be required to be calculated correctly and fully, including the balance sheet and off-balance sheet liabilities, then trillions of VND of banks’ profits will be spent on risk provision for bad debts.

The good news is from 2017 the government will implement a range of practical solutions in order to facilitate dealing with bad debts. Together with the improving business environment, this will increase banks’ profits and make bank employees’ performance more effective and efficient.

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