Banks struggle to reach 2023 profit targets

Of nearly 30 banks having released their third-quarter (Q3)’s financial statement, eight units have reported their profit figures falling below half of their full-year profit targets.

Of note, in the first nine months of this year Ban Viet Bank (BVBank) just reached 12.2 per cent of its full-year pre-tax profit target, counting nearly $2.6 million during the period.

ABBank just made 23.2 per cent of full-year profit target, reaching around $30 million during the period.

Compared to its full-year profit target at $53.8 million, VietABank just made 46 per cent of it target.

Similarly, VietBank completed nearly 44 per cent of pre-tax profit in nine months.

Bao Viet Bank reached 30.5 per cent of its full-year profit target, meanwhile the National Citizen Bank (NCB) even saw its profit contracted by $9.7 million.

Nguyen Huu Huan, head of Faculty of Finance at Ho Chi Minh City University of Economics, said that 2023 was brimming with challenges to the banking sector as turbulence in domestic and global markets led to diminished trade and consumption, contracting credit expansion and futher degrading asset quality.

Central bank (SBV) figures show that by the end of October, the credit surplus of the entire economy just expanded by 7.1 per cent against the whole year’s set target of 14 per cent.

Bao Viet Securities JSC forecast that the banking sector’s profit increased modestly to 5.2 per cent this year, before surging 18.9 per cent in 2024 when the economy is expected to regain growth momentum.

The interest and non-interest incomes of banks have been going down, while banks have had to put more into loan loss provisioning amid growing bad debt threats.

These expenses have directly ‘eaten’ into banks’ profit.

For instance, BVBank has put nearly $6 million into provisioning fund by Q3 of this year, up 15 per cent compared to one year ago. This has resulted in the bank’s just counting $2.6 million in profit during the period, taking an 85 per cent dip on-year.

ABBank saw its pre-tax profit take a 59 per cent plunge on-year in the first nine months due to lower net interest income of surging provisioning sums.

In the first three-quarters of 2023, the bank’s net interest income shed 20 per cent on-year, falling to $93.4 million, meanwhile the ratio of bad debts over total outstanding balance rose from 2.88 per cent to 3.51 per cent.

During the period, the bank needed to put $44.3 million into its provisioning sum, up 99 per cent on-year.

A survey about business trends in Q4 of 2023 conducted by the State Bank of Vietnam shows that credit institutions are less optimistic about their business results and profit picture going forward.

About 70 per cent of these entities expect the business picture to better in Q4 and the whole 2023, lower than the previous quarterly survey; and 13.8 per cent have concerns over profit contraction.

Tran Ngoc Bau, CEO of financial data provider WiGroup, assumed that banks were falling into a ‘growth contraction cycle’, having had to struggle to maintain profits.

In his view, the banking sector’s Q4 profit could see a sharp drop in the last quarter due to soaring costs against moderate income, before regaining growth momentum from Q2 of next year.

Charter capital of banks to increase sharply in 2023 Many banks plan to increase their charter capital in 2023 in order to ensure operational safety and have more resources for business development.

Ambitious 2023 targets out of reach with weak progress A sharp reduction in local production and global demand, coupled with increased geopolitical complexity, are undermining Vietnam’s efforts to achieve its economic growth target for this year.

Borrowers struggle to benefit from new lending policy Borrowers are finding it challenging to obtain new loans from banks to settle their existing debts at a different bank, despite the recent implementation of a regulation permitting debt transfer.