Habubank’s pre-tax profit drops

The bank’s unconsolidated financial report for the fourth quarter of 2011  showed it suffered a loss of VND55.6 billion ($2.67 million), resulting in a 27.4 per cent yearly drop in its pre-tax profit to VND431.69 billion ($20.7 million) in 2011.

In the fourth quarter of 2010, Habubank chalked up a profit of VND81 billion ($3.89 million) and in the third quarter of 2011 it was in the black, recording VND111.365 billion ($5.34 million) in profits.
Nguyen Quang Thuan, CEO of the Hanoi-based StoxPlus Financial Media Corporation, said the main reason for Habubank’s loss in the fourth quarter of 2011 was its increased provision for credit impairment in tandem with the rise in its bad debt ratio.  

The bank’s financial report showed its bad debt ratio climbed from 2.8 per cent in the third quarter to around 4.7 per cent in the fourt quarter last year, equal to VND836.2 billion ($40.1 million).

Habubank’s provision for credit impairment   accordingly rose 5.7 times from VND23 billion ($1.1 million) in the third quarter to VND132.19 billion ($6.34 million) in the fourth quarter.

Mirae Asset Securities Vietnam research head Le Quang Minh said such a high bad debt ratio revealed the bank’s inability to manage credit risk. The bad debt ratio of the whole banking system was only 3.6-3.8 per cent.

“Moreover, looking at financial statements for Habubank, it is clear to see that the bank has a negative cash flow, which implies liquidity pressure,” said Minh. Its falling income from investment securities was also blamed on for the loss in the fourth quarter of 2011.

In the third quarter of 2011, the bank earned VND51 billion ($2.5 million) from investment securities, accounting for  45.8 per cent of its total pre-tax profit. However, in the following quarter, the bank earned just VND401 million ($0.19 million) from this business.

Thuan added that in 2011, the bank’s operational expenses had also increased sharply, making profits drop. The bank had operational expenses of VND247.4 billion ($11.9 million) in the final quarter of 2011, while figures in the third and second quarters were VND167 billion ($8 million) and VND117 billion ($5.6 million) respectively.