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|Private banks scoop up profit while cutting loan yields. Photo: pb.vn|
As of September 30, TPBank reported total assets of $11.3 billion, up 35 per cent on-year, and exceeding expectations for the whole year by 4 per cent. The bank acquired an income of $428.7 million, up 39 per cent on-year. It also earned just over $189 million in profits, an increase of 43 per cent on-year. The figure for the third quarter is $58.26 million, up 336 per cent on-year.
An upbeat performance was also reported by HDBank, with total assets in the first nine months this year increasing by 26.7 per cent to around $15.04 billion. HDBank’s total assets are $526.08 million, signifying an increase of 23.6 per cent compared to the figure in the same period last year. The service sector continues to be the highlight of its operations, with an increase of 88.6 per cent in net income in the first three quarters.
Meanwhile, SHB reported total assets of $20.17 billion, up 12.5 per cent and exceeding the bank’s initial expectations. Its pre-tax profits increased to $219.56 million, up 93.9 per cent on-year. In the third quarter in particular, SHB acquired $81.74 million in profits, doubling the figure on-year.
The first bank to publish its financial report of the third quarter, NCB also saw a skyrocketing increase in business results. Notably, pre-tax profits in the period hit a 16-fold increase to $3.48 million. The accumulated pre-tax profit in the first nine months was $8.86 million, up 635 per cent on-year.
A bright picture was reported by Kienlongbank as well. In the first three quarters, it met 88 per cent of expectations in terms of profit for the whole year. Profits saw a six-fold increase to $38.17 million over the first nine months of 2021. In the third quarter only, profits increased by 76 per cent on-year to $3.13 million.
Finally, SeABank over the first nine months completed 99.7 per cent of the whole-year plan in assets, up 18 per cent on-year. Its loan plan meanwhile met 92 per cent of the target.
Tanh Tran, deputy head of Research at Yuanta Securities Vietnam, expected that the net interest margin declined in Q3 as banks cut loan yields to support affected clients. However, bank system liquidity has been loose since the beginning of June as demonstrated by the overnight rates, and the State Bank of Vietnam will retain a loose policy at least until the end of the year. Thus, the margin should improve slightly in Q4 as loan expansion recovers.
“Provisioning is predicted to rise 20 per cent on-quarter in Q3, especially for banks with low loan loss reserve ratios. Asset quality deterioration is inevitable due to COVID-19. Reported non-performing loans may remain low but it would be prudent for bansks to increase provisioning ahead of asset quality classification downgrades later,” Tran told VIR.
Data provider FiinGroup expects that profit in Q3 of the nine banks listed on the Hanoi and Ho Chi Minh City stock exchanges as well as the Unlisted Public Company Market, which includes Vietcombank and VietinBank, would decrease by 13.4 per cent on-quarter.
“Increasing provisioning and cutting interest rates to support customers affected by COVID-19 are the two main reasons for this decline,” FiinGroup noted.
Dao Minh Tu - Deputy Governor, State Bank of Vietnam
The current deposit interest rates are already at a low level because in 2020 the central bank proactively reduced deposit interest rates to help local customers. Since the beginning of this year, credit has increased by 7.42 per cent, while capital mobilisation has only increased by 4.8 per cent.
If deposit rates continue to plunge, deposits in banks will decrease considerably as investors seek other investment channels. Therefore, the SBV would not opt for a deposit interest rate reduction.
There are only two approaches for commercial banks to further reduce lending rates: cutting costs and cutting profits.
In the first half of 2021, many banks enjoyed a stellar profit bonanza, but in comparison with the banks’ capital, their profit margins were not impressive and even lower than in other industries nationwide.
It is noted that banks’ current profits have not been fully included in the provisioning or accrued interest, because the debt restructuring period and debt rescheduling have been extended accordingly.
In recent times, under the SBV’s meaningful directives, state-owned banks and privately-run banks have delivered substantial relief measures to help individuals and businesses ride out the bumps. From the beginning of 2020 until now, banks have lost around VND27 trillion ($1.17 billion) in their interest to help affected customers.