Banks do well in first half but difficulties lie ahead for the year

 

Hanoi (VNS/VNA) - Despite a worldwide economy hit hard by the COVID-19 pandemic, the banking sector has still enjoyed a good first half of the year and are on course to meet targets.

Nine of the 10 large-cap banks on the stock market are estimated to report positive profit growth for the second quarter of the year, according to SSI Securities Corporation (SSI).

Those banks are Asia Commercial Bank (ACB), the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), HCM City Development Joint Stock Commercial Bank (HDBank), Military Commercial Joint Stock Bank (MBBank), the Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Tien Phong Joint Stock Commercial Bank (TPBank), the Vietnam International Commercial Joint Stock Bank (VIB), the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and the Vietnam Prosperity Joint Stock Commercial Bank (VPBank).

Of those banks, ACB, Vietinbank and HDBank are the ones expected to report two-digit profit growth for the first half of the year.

ACB is forecast to record 4 trillion VND (172.8 million USD) worth of pre-tax profit in the first half, up 10 percent year-on-year, Vietinbank’s six-month profit is estimated at 3.03 trillion VND, up 38.7 percent year-on-year, and HDBank is expected to rise 26.7 percent year-on-year to 2.8 trillion VND.

Tien Phong Joint Stock Commercial Bank (TPBank) has estimated six-month profit gained a quarter year-on-year to reach 2 trillion VND.

The bank attributed its profit growth to an 11 percent annual credit growth and other activities such as insurance, financial guarantee and trade assurance and lower management expense.

At MBBank, Techcombank and VPBank, six-month profits are forecast to grow by one-digit rates of between 4 percent and 8 percent year-on-year.

At the annual shareholders’ meeting on June 30, the Vietnam International Bank (VIB) estimated first-half profit at 2.35 trillion VND, fulfilling 52 percent of the full-year target.

According to chairman Dang Khac Vy, good performance also came after credit in the first six-month period rose 6 percent compared to 2019 while business expenses were slashed and technology upgraded.

The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) last week announced profit in January-June was 11.3 trillion VND, equal to last year’s figure. Credit growth in the first half was 3.4 percent.

CEO Pham Quang Dung said outstanding credit gained 5 percent year-on-year to 772 trillion VND with retail credit increasing by 7.4 percent, up 1.2 percentage points from 2019.

But banks are still careful with the economic performance this year as the COVID-19 pandemic continues and the numbers of both cases and deaths globally are rising, forcing governments to keep the economies locked down.

In a survey conducted by the State Bank of Vietnam’s Monetary Forecasting and Statistics Department in June, financial institutions admitted their businesses slowed in the past two quarters.

Overall customer risk increased while their financial and business conditions downgraded and demand of banking-financial products and services also scaled down, the survey said.

In addition, the need to raise risk provision to prepare for further economic turbulence would drag on banks’ earnings in 2020, the survey said.

Average lending rate of the banking-financial sector was expected to decline further until the end of the year.

Outstanding credit growth of the sector was expected to be 3.5 percent in the third quarter and 10.5 percent in 2020, down from previous forecasts of 13.1 percent and 14.1 percent.

Bank stocks were among the key sectors that picked the market up from its three-year low in late March and a large number of investors are betting banks may produce some miracle for the year.

However, brokerage firms have warned the sector’s bad-debt ratios may increase strongly in the remaining months as borrowers are unable to perform as expected because of the prolonged pandemic.

As a result, banks may want to save money to prepare for the rise of bad debts and any hits from the international markets.

Phan Dung Khanh, investment director at Maybank Kim Eng Securities Co, told Dau tu (Investment) paper that the stock market was increasing unstably.

Potential risks for investors included a slowly-recovered economy, high valuation of shares, and cash-holders were seeking short-term profitability targets, he said./.