Profit of banks affected by low credit growth

Profit of banks affected by low credit growth

Many banks have so far not announced their financial statements for Q2/2012 and H1/2012 and whatever few banks have come out with their financial statements have not shown good business results. Banks’ profit has been affected by low credit growth and increasing provision for bad debts. In fact, in H1/2012, profit of commercial banks was less than that in H1/2011.

Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and Vietnam Bank for Industry and Trade (Vietinbank) have announced their financial statements for Q2/2012 as well as detailed business results for the first six months.

Accordingly, in Q2/2012, Vietcombank’s profit after tax reached over 865 billion dong, down 8.7 percent year-on-year. Accumulatively in the first six months, Vietcombank earned 2.156 trillion dong profit after tax, down 5.56 percent on year. Vietcombank has made a provision of 1.089 trillion dong and the accumulative figure in Jan-Jun was 2.038 trillion dong, much higher than 987 billion dong in H1/2011.

In Q2/2012, Vietcombank’s income was relatively stable in many segments in comparison with the same period last year. Of which, the lender’s net interest income reached 2.401 trillion dong, service segment made up 441 billion dong, forex trading activities posted 289 billion dong profit, capital contribution and stake purchase earned over 90 billion dong. Till June 30, 2012, Vietcombank’s total outstanding loans reached more than 214.239 trillion dong, rising 2.95 percent from early this year.

Similarly, Vietinbank (coded CTG) only gained 1.960 trillion dong profit, down 28 percent year-on-year due to a huge risk provision.

Profit after tax and pre tax profit of Vietnam Export Import Commercial Joint Stock Bank (Eximbank) (coded EIB) were up 1.5 percent in comparison with the same time last year. Accumulative pre tax profit in H1/2012 was 1.857 trillion dong, up 9.9 percent over H1/2011 (1.391 trillion dong).

Asia Commercial Joint Stock Bank (coded ACB -HNX) hit over 3.611 trillion dong of net profit in H1/2012, up 18.05 percent over H1/2011. However, due to increase in operating costs and risk provisions, ACB’s accumulative profit in six months was only nearly 1.393 trillion dong.

In the first six months, Military Commercial Joint Stock Bank (coded MBB) earned 1.838 trillion dong of pre tax profit, completed 51.4 percent year’s plan. Total net revenue in H1/2012 was 312 billion dong, up 18.8 percent year-on-year, completing 43.7 percent year’s plan. MB controlled very strictly its credit growth in H1/2012 to ensure the operation safety. The MB’s bad debt rate was 1.85 percent by June 30, 2012. After over eight months of official listing, MBB-coded share has been included in the basket of VN30 Index.

Saigon-Hanoi Commercial Joint Stock Bank (coded SHB-HNX) has recently announced its business result for Q2 and H1/2012. Its profit after tax was 220.54 billion dong, up 35.6 percent on year. Accumulatively in 6 months, SHB gained 440.7 billion dong, up over 40 percent compared with H1/2011. However, in H1/2012, SHB had to set up a credit risk provision of over 14 billion dong. Two main sources of SHB’s profit were 427 billion dong of net profit and more than 88 billion dong of other operations.

In other sectors except of a three billion loss in securities investment in Q2, 2012, the lender generally earned profit. By June 30, 2012, total outstanding loans of SHB reached 30.722 trillion dong, up 5.36 percent compared with the beginning of this year. In SHB’s debt structure, up to 19.286 trillion dong was short term loans, accounting for nearly 63 percent of the bank’s total loans. SHB’s bad debt rate (from group 3 to group 5) was 2.52%, equally 774 billion dong. Of which, the irrecoverable debts were 315.88 billion dong, up 13.48 percent compared with the beginning of 2012.

Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank-coded STB) has announced its holding bank’s business results for Q2 and H1/2012. Accordingly, in Q2/2012, Sacombank’s profit after tax was 539.6 billion dong, down over 21 percent year-on-year. Accumulatively in six months, Sacombank earned 1.296 trillion dong of profit after tax, up 14 percent over 2011.

In Q2/2012, Sacombank made a credit risk provision of 330 billion dong, up 628 percent compared with 45 billion dong in Q2/2011 and the accumulative figure in Jan-Jun was 372 billion dong from over 234 billion dong in H1/2011. All business sectors of Sacombank posted profit in H1/2012, of which its net interest income segment was still a main source with 1.433 trillion dong in Q2/2012 and nearly 2.9 trillion dong in H1/2012. Service sector made a contribution of 183 billion dong in Q2/2012 and 375 billion dong in H1/2012, forex trading activities contributed 129 billion dong in Q2 and 175 billion dong in H1.

By June 30, 2012 total outstanding loans of Sacombank were 78.346 trillion dong, slightly down compared with 78.448 trillion dong at the beginning of this year. Meanwhile, the bank’s bad debt rate (from group 3 to group 5) was 1.28%, or 1.007 trillion dong. The irrecoverable debts were 304.6 billion dong, up 92 percent on compared with late last year.

In this season of announcing financial statements, stock prices of listed banks have not changed at all. Analysts thought that the reason for this situation is losing attraction in bank shares due to bad debts.

Tran Du Lich, member of the National Council of Consulting Finance and Monetary Policies said that if setting up enough provision at 75%, banks could not earn so much profit as announced. Once being unsure about information, investors would be more careful when investing in bank shares by this time. Thus, prices of bank shares were nearly unchanged although banking industry posted the most satisfactory performance amongst sectors for the time being.

Thời báo Kinh Tế Việt Nam