2010 was a difficult year

The pre-tax profit of Dong A in 2010 was 858 billion dong

The management
boards of Dong A and Viet A Banks had to report to shareholders at shareholder
meetings held several days ago, that they failed to fulfill the 2010 business
plans set early last year.

The pre-tax
profit of Dong A in 2010 was 858 billion dong, an increase of 8.86 percent in
comparison with 2009. Explaining why the bank could fulfill only 78 percent of
the yearly business plan, managers of the bank said that “in order to ensure
the capital adequacy ratio as requested by the State Bank, in 2010; Dong A had
to focus on mobilizing capital at relatively high interest rates due to the
stiff competition on the market.” This made the capital costs higher than that
in 2009.

Besides,
the State Bank set up a cap on lending interest rates, which led to the margin
between the deposit and the lending interest rate narrower; thus, making the
profit lower. Though Dong A tried to seek income from non-credit services, the
earnings from foreign currency and gold trade decreased sharply; since the
central bank has prohibited trading gold on account, and restricted the capital
mobilization and lending of gold. The gloomy stock market could not bring
profit to Dong A’s Securities Company. Therefore, the expansion of the ATM
network made the operation costs of the bank increase.

The same
explanations were given by managers of Viet A Bank. The bank’s managers were
told early last year, that they need to make 498 billion dong worth of pretax
profit, and have the dividend of 15 percent per annum. However, in 2010, the
bank only got 347 billion dong in pretax profit and fulfilled 70 percent of the
yearly plan. The dividend paid in 2010 was low, at 12 percent per annum; even
lower than the average deposit interest rate in 2010.

2011 will be a more difficult year

Bankers
complain that they are always under the pressure from shareholders, who always
want high profits and high dividends. Meanwhile, this is a very difficult task,
because the State Bank has decided to tighten the monetary policies, telling
commercial banks to curb the credit growth rate at no higher than 20 percent
this year.

Trinh Van
Tuan, General Director of OCB, said “the policies on restricting credit growth
will affect bank’s operation, especially small and medium banks who have been
“living” on credit.”

Tuan said “the
most difficult task for managers for 2011 is to obtain high profits. The
government has forced commercial banks to increase their chartered capital to
three trillion dong at least.” Meanwhile, investors only agree to pour more
money into the banks if banks promise high dividends for them.

Banks have
to seek profit to satisfy the investors who have injected money in the banks.
The profit mainly comes from credit (for some banks, credit brings 60 percent,
or even 90 percent of the source of revenue). However, the income source tends
to get narrowed because of the new policy of the State Bank.

OCB plans
to submit to the shareholder’s meeting, the plan to obtain the profit growth
rate of 20 percent in 2011, which is equal to the credit growth rate. The bank
plans to pay the dividend at 10 percent this year.

“We have no
other choice. We have to restrict lending as told by the central bank.
Meanwhile, we cannot find income sources from non-credit operations overnight,”
Tuan said.

At the
shareholders meeting, Viet A’s management board submitted the plan to have the
62 percent credit growth rate in 2011. However, a representative from the State
Bank of Vietnam,
who attended the meeting, said immediately that “the bank will have to adjust
the targeted credit growth rate because no bank will be allowed to obtain the
credit growth rate at higher than 20 percent.”

C. V