Banks target higher H2 earnings

Local commercial banks are hoping to earn higher profits in the next two quarters of the year so that they can meet their annual pre-tax targets, but current market conditions make this a difficult task.

The first half of the fiscal year is almost over, but pre-tax profits at many banks only meet 20-30 percent of the year’s target.

The deputy chair of a commercial bank said they’d set a profit target of 550 billion dong ($26.5 million) for the year, they’d managed only 100 billion dong ($4.8 million) in the first five months.

However, he said he hoped to make up a lot of lost ground in the coming months. In previous years, earnings usually increased strongly in the two remaining quarters of the year, he said.

The Tien Phong Bank posted pre-tax profits of 139 billion dong in the first five months, meeting 38.6 percent of year-target, however, its general director Vu Tu was positive about its possibility of fulfilling year-target of 360 billion dong ($17.1 million), the Dau tu newspaper reports.

Tu said monetary market will be likely to have positive changes later this month, especially when the interest rate in the interbank market has decreased, which will be a premise for interest rate in the market to fall.

“It may be rather early to say so, but policies to control inflation set by government and the State Bank of Vietnam have begun showing effective,” he said.

Similarly, the Orient Joint Stock Commercial Bank (OCB) set a pre-tax profit for 2011 of 500 billion dong ($23.8 million), but the bank just obtained a profit of 115 billion dong ($5.5 million) in the first five months.

Trinh Van Tuan, OCB general director, said the bank had achieved only five percent credit growth against the same period last year. He also said that the bank was gradually restructuring itself to cut back outstanding loans to the non-production sector to 22 percent by the end of this month.

He said he hoped that the situation will be better in the remaining months of the year, creating favourable conditions for its operation.

However, with the government’s credit growth cap of 20 percent, and outstanding loan ratio to the non-production sector to be cut back to 22 percent by the end of June and 16 percent by the end of the year, the banks’ hands are tied.

The target restrictions would make it difficult for banks to earn more in the next two quarters because their profit mainly comes from credit activities. At some small banks credit makes up to 80-90 percent of the banks’ total profits. – Vietnamplus

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial