Banks still on the back foot

Banks’ credit has expanded slowly, albeit banks took constant efforts to soften lending rates and roll out concessionary credit packages to woo customers.

State Bank statistics show that banking sector credit expanded 2.35 per cent in the year to the end of September. Experts forecast the sector’s full-year credit growth would hover at around 4-5 per cent this year, but not 8-10 per cent as it was expected which will cast a dent on banks’ respective profit figures.

LienVietPostBank raked in VND468 billion ($22.3 million) in after-tax profits in the first nine months, plunging 53 per cent on-year. Meanwhile, the bank had to provision VND166 billion ($8 million), triple that on-year.
The bank’s bad debt stood at 2.66 per cent as of September 30, 2012, slightly surging compared to early 2012’s 2.14 per cent.

DongA Bank posted VND1 trillion ($47.6 million) in pre-tax profits in the year ending September, tantamount to 69.4 per cent of the year’s projection, but the bank might have to revise its full-year profit target, according to the bank’s general director Tran Phuong Binh.

Besides, industry insiders assumed banking authority’s recent move compelling banks to close their gold position before stopping mobilising gold on November 25, 2012 could also take a hit on bank profits.

For instance, big commercial joint stock bank ACB incurred VND1.251 trillion ($59.6 million) losses in 2012’s third quarter, making its pre-tax profits in the first nine months slide to VND1.187 trillion ($56.5 million).
The loss came as ACB had to buy gold in the domestic market which was VND2-3 million ($95-$143) per tael more expensive than that in the global market to balance its gold position.

One of largest joint stock commercial banks on scale Eximbank reaped VND2.3 trillion ($110 million) pre-tax profits in the year to the end of September against full-year target VND4.6 trillion ($220 million). Meanwhile, Sacombank only fulfilled more than 60 per cent of its full-year profit target in the period, according to the bank’s general director Phan Huy Khang.

Bad debts have proven thorny to banks as rising inventory and sinking consumption led to firms’ default. Surging bad debt rates made banks to spend more on making provision which has bitten into bank profits.