Banks hand out pink slips as profits fall
Banks hand out pink slips as profits fall
Many major banks have announced a fall in profits for both last quarter and last year, leading to payroll cuts to reduce costs.
Tuoi Tre (Youth) newspaper reported that Eximbank earned pre-tax profits of VND827 billion ($37.59 million), a steep fall from VND2.851 trillion in 2012.
ACB reported losses of nearly VND293 billion in the fourth quarter due to a 45 per cent fall in interest earnings and a loss of VND34 billion from gold and foreign currency trading.
Sacombank saw a year-on-year decrease of nearly VND212.2 billion ($9.64 million) in Q4 profits due to lower interest earnings. Phan Huy Khang, the bank's general director, said 85 per cent of revenues in the banking industry comes from loan interest.
Nguyen Duy Phong of Ban Viet Securities Co said the decline in profits was foreseen since costs remained high while income from loan interest fell sharply. He added that bad debts would continue to eat into banks' profits.
According to economist Nguyen Chi Hieu, banks are facing the consequences of rapid development in previous years. He said the sector's growth rate had been three to four times that of GDP as against a "suitable" level of two times.
They had been locked in a race to recruit employees and open branches, and are still counting the costs, he said.
As profits fell, they began to shed workers to reduce costs.
In the fourth quarter of last year, Eximbank laid off 340 people, three times as many as it had sacked in the previous nine months.
In the same period ACB laid off 217 people.The bank sacked 17 per cent of its total staff last year.
Hieu said: "Profits earned by the banking sector could indicate a country's economic strength. [But] when businesses face difficulties, banks must reduce their profits…"
Huynh Anh Tuan, general director of SJC Securities Co, said the situation would become clearer from June 1 when Circular No 2 on asset classification, risk provisioning, and use of provisions against credit risks takes effect.
He said banks' profits would be further affected when bad debts are reported more clearly, but then the Asset Management Company would have more favourable conditions to operate and help ease the difficulties facing banks.
vietnamnews
