Profit targets the major headache for banks

Source: Pano feed

Thien Binh


Since July 31, many banks have announced that they will meet this year’s profit targets. However, those goals may be beyond their reach as the business situation has turned sour.


According to a press release of the Government Office after the regular meeting late last month, the banking network as of September 20 reported credit growth rate of 6.05% against late 2012. Meanwhile, another report of the central bank showed that credit growth rate was 6.45% as of the end of August.


These figures suggest that lending activities declined during the period while local credit institutions earlier had expected to push up credit growth rates in the second half of the year.


As credit accounts for over 80% of banks’ income, it is hard for banks to reach full-year profit targets if credit growth rates have declined as of the end of the third quarter.


Nam A Bank, which posted up credit growth rate of nearly 25% by July 31, is still unsure about its profits.


Tran Ngo Phuc Vu, general director of Nam A Bank, said that the bank has sacrificed this year’s profits to offer low lending rates for customers, thus expanding its customer base and total assets. As a result, the profit was VND13 billion by July 31 compared to VND184 billion at the end of 2012.


Statistics of the central bank’s HCMC branch showed that half of 14 banks based in the city reported profits at below half of 2012′s figures.


In addition, bad debts are also a big problem as banks have to set up reserve funds for these loans. Although banks are trying to tackle bad debts, the ratio of non-performing loans has increased steadily month after month.


In HCMC, 14 local banks reported bad debt ratio of 5.65% by January 31 but the ratio increased to 5.96% in March 31 and 5.99% in August 31.


According to Viet Capital Securities Company (VCSC), Vietcombank obtained VND3.7 trillion in pre-tax profit in the Jan-Sep period, down 16% year-on-year, while risk provisions increased 17% to VND3 trillion.


High bad debts have also affected financial capability and business efficiency of banks and curbed credit growth of the banking system.


The report of VCSC also said that banks are facing rising bad debts and a slump in profits due to the gloomy real estate market. Banks find it hard to liquidate mortgaged assets that are properties while competition in the industry has become fierce.A




Đăng ký: VietNam News

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