HA NOI (VNS)— A number of commercial banks have revised their business targets for the year due to declining profits and rising bad debt levels, according to a report carried by the publication Dau Tu (Viet Nam Investment Review).
|Customers take bank loans at a HDBank branch in Ha Noi. Many commercial banks have revised their business targets for the year due to declining profits and rising bad debt levels. — VNA/VNS Photo Tran Viet
The need to allocate additional capital to risk provision funds has also cut into the bottom line for banks, the report said.
The deputy director of the State Bank of Viet Nam's HCM City branch, Nguyen Hoang Minh, said that lending was the primary line of business of commercial banks and slow credit growth had significantly restricted this source of earnings.
"With bad debt levels rising, the profits of banks in HCM City are likely to reach only about 27-30 per cent of where they were last year," Minh said.
VietinBank has consulted its shareholders about a possible adjustment to its approved targets for the year due to unsatisfactory credit growth. At the end of the third quarter, the bank's profits had reached VND6 trillion (US$285.7 million) – only 66 per cent of the goal for the entire year.
A loss of about VND1.25 trillion (nearly $60 million) in the third quarter whittled Asia Commercial Bank's pre-tax profits for the first nine months of the year down to less than VND1.2 trillion ($56.2 million), a pace far off its full-year target of VND5.5 trillion ($262 million).
Eximbank general director Truong Van Phuoc said that, despite considerable efforts, the bank expected to meet just 70 per cent of its profit target this year. Eximbank has seen lending decrease by over 10 per cent and bad debts rise by 1.8 per cent so far this year, Phuoc said.
Sacombank projected VND3.4 trillion ($162 million) in pre-tax profits earlier this year and achieved 70 per cent of the figure by the end of October. But the bank's general director, Phan Huy Khang, said its profits for the year were likely to meet only 75 per cent of the target since VND1.2 trillion ($57 million) would have to be allocated to risk provision.
DongA Bank general director Tran Phuong Binh said it was extremely difficult for many banks to achieve norms in the context of mounting bad debts which have put the brakes on further credit growth. The debt repayment capacities of borrowers were further weakening due to mounting inventories of unsold goods, Binh said.
It would be nearly impossible for the bank to reach its targeted profit of VND1.5 trillion ($71.4 million) this year, depsite a pre-tax profit of VND1 trillion ($47.6 million) in the first nine months, he added. — VNS