Commercial banks post high profits

Local commercial banks had high profits last year despite turbulences in the currency market.

According to the StoxPlus Financial Media, among companies listed on the Ha Noi and HCM City stock exchanges, the ratio of revenue and profit of banking sector was 39.6 per cent, ranking second after the financial sector and much higher compared to other sectors, including consumer goods (19,2 per cent), industrial sector (14.5 per cent), oil and gas and consumer services (8.8 per cent).

Leaders of many commercial banks said that most profit was from credit activities.

Many commercial banks, including Techcombank, Eximbank, Maritime Bank and Sacombank, have also posted positive profits for last year.

While credit activities have brought big profits to commercial banks, businesses have faced many difficulties due to high lending interest rates last year.

Cao Si Kiem, chairman of the Viet Nam Small – and Medium-sized Enterprises Association, said the average profit margin of its business members was about 20 per cent, while the lending interest rate was about 17-18 per cent and even higher.

Profits at some enterprises were too low to pay the interest rate on bank loans, he said.

Tran Huu Chinh, chairman of the board of management of the HCM City Fisheries Development Corporation (Fideco), said high lending interest rates had caused many companies to shrink their operation scale or cut back on production, waiting for a better time.

If the interest rate would not fall soon, it could severely affect economic growth since businesses would not dare to start new projects or widen their scale of production , he said.

Cao Tien Vi, chairman of the board of directors for Sai Gon Paper Joint-Stock Company, said interest rates had lowered profits and made it more difficult to do business, but the company in the short-term had no other choice than to borrow money from the bank to ensure its operations.

“The company’s business strategy last year as well as this year is how to ensure the company’s operation, ensuring employment for our workers. We dare not expect to earn high profits,” he said.

Pham The Anh, an economic expert at Thang Long Stock Company, said the money markets last year witnessed a lot of fluctuations.

To minimise risk on the money market, banks had widened the spread between deposits and lending interest rates, so the more credit growth a bank achieved, the more profit it earned, he explained.

Besides offering loans to businesses, large banks earned a lot of profit from inter-bank lending since the inter-bank lending rate during some periods jumped to 15 per cent or even 20 per cent, he added. — VNS

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial