Rising provisions slash Vietcombank, VietinBank profits

Transactions are carried out at Vietcombank. Rising provisions have slashed profits of Vietcombank and VietinBank in Q1. Photo vnexpress.net

The Bank for Foreign Trade of Viet Nam (Vietcombank) posted a pre-tax profit of about VND1.46 trillion (US$69.52 million), down 3 per cent over the same period last year. It attributed the decline to the establishment of a VND1.52 trillion ($72.38 million) provision, which rose by nearly 27 per cent year-on-year.

Also, the bank's bad debt ratio increased to 2.97 per cent at the end of Q1, from the 2.3 per cent recorded at end-2014, with outstanding loans growing 2.3 per cent during the quarter.

The bank reported significant growth in most business norms, with net revenues reaching nearly VND3.50 trillion ($166.67 million) in Q1, up 20 per cent over the same period last year.

Services were responsible for revenues of VND337 billion ($16.05 million), up 23.4 per cent, while foreign currency trading generated VND471 billion ($22.43 million), an increase of 6.6 per cent.

But securities investments showed less profitability, bringing in only VND44 billion ($2.10 million) for the bank, a decline of 75 per cent year-on-year.

Vietcombank's total asset value also contracted by 6.45 per cent, reaching about VND540 trillion ($25.71 billion) during Q1.

Meanwhile, the Viet Nam Bank for Industry and Trade (VietinBank) posted a total business profit of VND3.07 trillion ($146.19 million) in the first quarter, up nearly 24 per cent over the same period last year.

However, with a provisional fund increasing by 1.5 times to VND1.51 trillion ($71.90 million), its pre-tax profits grew by only 7.3 per cent year-on-year at VND1.56 trillion ($14.28 million).

Also, profits from services declined 13 per cent to VND271 billion ($12.90 million), and profits from foreign currency trading dropped 70 per cent to VND37 billion ($1.76 million).

The bank also suffered a loss of VND43 billion ($2.05 million) from securities investments, while its capital contribution activities saw profits of only VND14 billion, or two-thirds of those in the same period last year.

Further, VietinBank reported a 2.3 per cent decline in total assets, although deposits at this bank grew 1 per cent and lending expanded 2.32 per cent during Q1.

Dau tu (Vietnam Investment Review) reported earlier this month that banks would need more provisional funds to support the risk of non-performing loans (NPLs), in accordance with national requirements for controlling bad debts.

Several lenders, including Asia Commercial Bank, Saigon Joint Stock Commercial Bank and Vietnam International Bank, as well as Eximbank, have affirmed plans to accelerate such provisions.

Meanwhile, since January the State Bank of Viet Nam has urged credit institutions to speed resolution of debt, in a bid to reduce the overall NPL ratio in the domestic banking system to less than 3 per cent in 2015, following government orders.