Banks fall short of profit targets

DongA Bank said its profit this year would be around VND750 million ($37.5 million), equal to last year’s figure even though the bank had set a pre-tax profit target of VND1.1 trillion ($55 million) for 2010.

The bank attributed its shrinking profits to stalled growth in outstanding loan balances in the fourth quarter.

Viet A Bank set a pre-tax profit of VND498 billion ($24.9 million) in early 2010, then it lowered the profit target to VND300-350 billion for the whole year. However, even the adjusted level could not be achieved on the back of escalating interest rates and high credit pressures in later months of 2010.

Techcombank aimed for a pre-tax profit of VND3.467 trillion ($173.3 million) for 2010. However, the bank’s general director Nguyen Duc Vinh said Techcombank merely reaped VND2 trillion in profits in the year ending November, far below the set figure.

Meanwhile, some other banks were confident in achieving their 2010 profit targets. For example, Sacombank chairman Dang Van Thanh  said the bank posted more than VND2.190 trillion ($109.5 million), or 91.3 per cent of the year’s profit target in the first 11 months.

In another case, Eximbank reported VND2.107 trillion ($105.3 million) in pre-tax profit in 11 months only, reaching 95.8 per cent of the year’s plan.

Banks said that their dwindling profits were partly due to State Bank’s Circular 19/2010/TT-NHNN dated September 27, 2010 which regulates that banks could only use up to 80 per cent of their deposits to lend. This has driven banks to raise the mobilising rate to attract idle capital from the community, thus pushing up banks’ expenses.

The State Bank recently asked banks to strictly observe its 14 per cent, per year ceiling deposit rate requirement after several banks intentionally raised their mobilising rate to exorbitantly high levels of 17-18 per cent to woo depositors.