Small banks struggle to reach profit targets

Small banks perform somewhat worse than their larger counterparts

Small banks have been cautious in setting profit targets because input costs increased along with deposit rates, while interest rates are difficult to raise and even had to be reduced according to the directions of the government and the State Bank of Vietnam issued in early 2018. This is why small banks set profit targets at around one or a only a few billion dongs.

Specifically, Viet Capital Bank plans to reach VND80 billion in pre-tax profit during the whole year. The bank has yet to report on its performance in the first half, but confirmed that it will reach the plan set forth.

Meanwhile, VietBank planned nearly VND100 billion ($4.4 million) in pre-tax profit, but strives to gain VND300 billion ($13.2 million), up 14 per cent on-year.

VietBank’s general director Nguyen Thanh Nhung stated that the bank will shift its business model to services in the time to come. Currently, this segment only accounts for 3 per cent of VietBank’s total revenue, but it is expected at 10 per cent in this year and 20 per cent in 2020.

Last month, Saigonbank submitted the target of VND150 billion ($6.6 million) in pre-tax profit for 2018, twice as much as its 2017 performance.

However, Nguyen Van Dung, director general of the State Bank of Vietnam’s Inspection and Supervision Agency, said that it is rather difficult for Saigonbank to hit the target based on the correlation between asset growth, deposit, and credit.

Meanwhile, VietABank set the target of VND312 billion ($13.75 million) in pre-tax profit this year, while it was VND122 billion ($5.4 million) last year, driven by a large amount of setting aside provision.

While small-scale banks have yet to disclose their profit in the first half, others have reached the profit target for the whole year. Nam A Bank’s deposits hit 88 per cent and pre-tax profit reached 97.3 per cent of VND320 billion ($14.1 million) of the yearly plan, while total assets raised 23 per cent more than in the same period last year.

TPBank gained VND1.024 billion ($45.1 million) in pre-tax profit in the first half, up 112 per cent on-year and 12 per cent compared to the annual target. Its total assets are over VND126.5 trillion ($5.6 billion) and charter capital rose by VND876 billion ($38.6 million) to VND6.718 trillion ($296 million).