Banks target higher second-half 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 pretax targets, but current market conditions make this a difficult task.

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

The deputy chairman of a commercial bank said they’d set a profit target of VND550 billion (US$26.5 million) for the year, they’d managed only VND100 billion ($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 pretax profits of VND139 billion in the first five months, meeting 38.6 per cent of year-target, however, its general director Vu Tu was positive about its possibility of fulfilling year-target of VND360 billion ($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 reduced, 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 Viet Nam have begun showing effective,” he said.

Similarly, the Orient Joint Stock Commercial Bank (OCB) set a pretax profit for 2011 of VND500 billion ($23.8 million), but the bank just obtained a profit of VND115 billion ($5.5 million) in the first five months.

Trinh Van Tuan, OCB general director, said the bank had achieved only five per cent 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 per cent by the end of this month.

He hopes 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 per cent, and outstanding loan ratio to the non-production sector to be ut back to 22 per cent by the end of June and 16 per cent by the year-end, the banks’ hands are tied.

The target restrictions would mke 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 per cent of the banks’ total profits. – VNS

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial