Banks may find it hard to earn increased profits in Q2

Some banks have announced preliminary encouraging business performance results for the first half of 2010, however bankers predict that the creditors will find it harder to earn big profits in the second quarter, given that the credit growth is likely to remain very slow.

Looking back at the first quarter of 2010, most banks reported their positive profit figures compared to Q 1, 2009. However, according to banks, their traditional revenue sources, especially the credit activity have revealed difficulties.

The key revenue from credits has narrowed significantly. In 2009, the revenue from credits at Sacombank and Maritime Bank accounted for approximately 40 percent – 60 percent of the total structure, while the rate of other banks was still to 70 percent – 90 percent. In the first quarter of this year, this ratio of Sacombank was only 26.48 percent and is tending to decrease further in the next months. Or, at Maritime Bank, this ratio was only about 25 percent in the first quarter and this bank said it has not yet seen big improvements in near future.

A major cause of the rapidly narrowed revenue came from the slow credit growth in the first three months of the year (only around 3 percent).

And even in this activity, the high profitability for banks is now difficult. Some figures from commercial banks showed that the marginal profit of banks in Q1 was at approximately 2.7 percent.

In Q 2, according to bankers, the profit growth of banks was not much improved when the credit growth was still very slow, at 10.52 percent for the first half of 2010, while this credit growth in the same period in 2009 was over 17 percent.

The revenue from the credit activity is low, while the income from a traditional investment channel (forex trading) also showed more prominent difficulties. In Q1, profits of foreign exchange at commercial banks fell very sharply.

Asia Commercial Bank earned only 104.6 billion from this service compared to 311.16 billion dong of Q1 in 2009; Sacombank was 71.15 billion dong compared with 227.06 billion dong in Q1 of 2009; Eximbank also earned 21.63 billion dong from forex trading in Q1 while this number of this bank in the same period in 2009 was 53.04 billion dong.
In addition, in Q1, the SBV ordered all commercial banks to close their gold trading floor, which was a seriously direct effect to banks’ profit drop.

TBKTVN

Tags: vietnam bank, Vietnam finance, Vietnam financial