City banks see profits shrinking

City banks see profits shrinking

Banks in HCMC posted up a combined pre-tax profit of just VND5.7 trillion in the January-July period, or 33% of last year’s total, according to the HCMC branch of the State Bank of Vietnam (SBV).

Besides, the lenders estimate a further fall in profits in the near future as interest rates of old loans are being cut to below 15% per annum. According to SBV, over 70% of old credits had been subject to new interest rates as of August 3 while banks will complete the interest rate cut for all loans at the end of this month.

A large commercial bank in the city said the rate cut policy would hit its profits by around VND900 billion. Meanwhile, another leading bank forecasted a profit reduction of VND600 billion.

For State-owned banks or commercial banks with a major State ownership, the rate cut policy would hit their profits hard, with each bank estimating a loss of VND1-1.5 trillion.

Up until now, no banks except for Sacombank have fulfilled 50% of their 2012 profit targets. The CEO of a commercial bank said that the lender will meet just 70% of its profit target for this year due to a lot of hard work.

Some banks see no credit growth, although they have offered low lending rates from 12-13% per year.

“In previous years, many enterprises at this time have asked for loans to purchase and reserve input materials for the high production season in the fourth quarter. This year, they have no need for capital due to huge stockpiles and stagnancy in business,” the banker said.

The Saigon Times