Total net profits in the banking industry last year increased by 15.1
percent over 2010, a rate lower than that of the preceding several
years, the State Bank of Vietnam announced on June 20.
Nearly half of all lending institutions saw their profits tumble in 2011, and over 10 percent of those suffered losses.
"Generally speaking, credit institutions' profitability last year
matched the scale of their assets, ownership capital and management
capacities, as well as the difficult economic conditions," the SBV wrote
on its website.
The figures were released at a time
when the public had begun to question why a handful of banks had
continued to post significant profits during difficult economic times
when production and business activity was stagnant.
The central bank attributed the profitability of some institutions to
their efforts to enhance the efficiency of their use of capital. These
institutions expanded services related to money transfer, electronic
payment and foreign exchange, with total revenues from such services
increasing 15 percent last year over 2010.
the SBV admitted that the profitability of the banking system overall
was driven by a few banks with large-scale assets and capital and good
management. The profits of many banks, they added, were whittled away
significantly by the need to establish provisional funds against risk.
The central bank said it was studying revision in
regulations related to debt classification, provisional funds and risk
management to assist lending institution's to report profits more
Meanwhile, increasing bad debt levels had
continued to weigh on the profits of the nation's lending institutions,
and the margins between earnings and costs as of April 30 was "very low"
and half the level of the industry at the same time last year, the
State Bank said.
Two of the most important indices
reflecting a bank's financial health – return-on-assets (ROA) and
return-on-equity (ROE) – were lower last year, the State Bank said.
Industry-wide, ROA fell from 1.29 percent in 2010 to 1.09 percent last
year, while ROE declined from 14.56 percent in 2010 to 11.86 percent
These figures lagged behind regional averages in Southeast Asia , where the ROE of banks remained at 14-15 percent.-VNA