|Dollars being counted. Many banks posted losses in the foreign exchange market last year. — VNA/VNS Photo Tran Viet
HA NOI (VNS) — Many banks suffered losses in the foreign exchange market last year, according to their latest financial reports.
According to news website ttvn.vn, VPBank lost VND290 billion (US$12.9 million) in currency trading last year, an increase of 220 per cent over the previous year.
Techcombank lost VND192 billion ($8.5 million) in the foreign exchange market in 2015, after the bank earned a profit of nearly VND23 billion ($1 million) in 2014.
Currency trading whittled away profits of Vietnam International Bank, as the bank lost VND24 billion ($1.1 million) in the foreign exchange market in 2014, and VND10.5 billion ($467,000) also in this market in 2015.
Several other banks profitted from currency trading last year, but profitability diminished significantly.
Vietinbank, one of the largest banks in Viet Nam, earned a profit of VND19.7 billion ($876,000) in the foreign exchange market last year, a 95 per cent decline from the previous year.
Eximbank, at which currency trading was a major service, earned a profit of more than VND62 billion ($2.8 million) in the foreign exchange market in 2015, 64 per cent less than in 2014.
Vietcombank posted a profit of VND44 billion ($1.9 million) from currency trading in the fourth quarter of 2015 alone, an 83 per cent fall from the same period in 2014.
Currency trading profitability largely depends on exchange rate developments. The exchange rate witnessed significant fluctuations last year, according to industry insiders.
In 2015, the State Bank of Viet Nam (SBV) devalued the dong three times and loosened its trading bands twice, leading to cumulative depreciation of five per cent in the domestic currency compared to the dollar.
"Dealing in foreign exchange was truly risky over the past months, especially for banks having a negative foreign currency balance," said Nguyen Tri Hieu, a banking and finance expert.
Specialists at Vietcombank Securities say opportunities exist for banks to improve their foreign currency business earnings, with the central SBV applying a daily-adjusted reference exchange rate.
Since the beginning of this year, SBV has been adjusting the dollar/dong rate daily instead of maintaining a long-term fixed rate.
The rate is now set based on exchange rate changes in the inter-bank foreign exchange market, as well as on monetary developments in countries involved in Viet Nam's trade, investment and financing ventures.
The SBV expects the daily-adjusted rate to enable it to ensure its management objectives, while allowing exchange rate flexibility as per global monetary fluctuations. — VNS