Joint stock banks lower profit targets

Trinh Van Tuan, OCB’s general manager said opportunities would not be as easy to come by as they had been in the past two years given tightening monetary policy. And Nguyen Dinh Tung, deputy general manager of Maritime Bank, said the difficult conditions seen last year would linger on into 2011.

“Monetary tightening can cause difficulties for the banking system. High interest rates discourage customer borrowing. Meanwhile, credit still contributes over half of banks’ profits,” said Tung.

Sacombank plans to ask shareholders for approval of its plan for a pre-tax profit of VND2.8 trillion ($140 million) in 2011 at the company’s general meeting in March, a figure that would constitute a year-on-year increase of 16 per cent against last year.

OceanBank has set a 2011 pre-tax profit target of VND1 trillion ($50 million). This is up 44 per cent on 2010, but far lower than the 100 per cent year-on-year profit growth in 2010.

Meanwhile, banks are handing in mixed report cards for 2010.

Medium-scale banks like Maritime Bank reported robust profit growth of 151 per cent in 2010 against the previous year, to a pre-tax profit of VND1.5 trillion ($75.9 million). Military Bank earned VND2 trillion ($100 million), a year-on-year increase of 50 per cent.

Small-scale commercial banks also had good showings in 2010. DaiA Bank is eying a pre-tax profit of VND120 billion ($6 million), a 13 per cent increase on its target for last year.

OCB reported a profit of over VND400 billion ($20 million) and also exceeded profit forecasts for 2010.

However, local joint stock commercial banks are racing to fulfil their full-year pre-tax profit targets after adjusting operations to meet new regulations on safe ratios introduced last October.

At the same time, Techcombank, one of the 39 commercial banks operating in Vietnam, cut its targeted pre-tax profit by 14.5 per cent to VND2.8 trillion ($147.3 million) for 2010.  The cut, which excludes the figures of its subsidiaries, is designed to make proper adjustments in line with market movements.

Since November deposit interest rates have been quoted at around 12-14 per cent per year, pushing the credit interest rate to around 17-19 per cent a year for the time being. This is a result of the country’s tightening monetary policies which are making it hard for customers to access banking loans because of high interest rates.