Forced to tighten credit, banks still can obtain satisfactory profits

Published: 17/05/2011 05:00



Contrary to all
predictions, banks’ finance reports still show satisfactory business results
for the first quarter of 2011, even though banks have been told to restrict the
credit growth rate at 20 percent, and it is very difficult to look for
borrowers since the lending interest rates have become sky high.

has reported a sharp pretax profit increase of 290 percent in the first quarter
of 2011, in comparison with the same period of 2010. In the first three months
of the year, the bank earned 60 billion dong in profit.

The pretax
profits of “big guys” were also very high. The Asia Commercial Bank ACB has
reported the profit of 900 billion dong in the first quarter, an increase of 50
percent. Meanwhile, Eximbank got 1000 billion dong in profit, fulfilling 35.2
percent of the yearly plan (the bank hopes to obtain the pretax profit of 3
trillion dong this year, an increase of 26 percent over 2010).

the equitized bank, has also reported a satisfactory business result with the
pretax profit of 1700 billion dong in the first quarter, and the post tax
profit of 1335 billion dong, up by 20 percent over the same period of the last

When asked
about the surprisingly high profits, most of bankers declined to give comments.
Only the deputy general director of a joint stock bank based in HCM City,
said that though his bank got a high growth rate in the first quarter, the real
profit was not big.

decline to make comments about the profits partially because they fear that
they may face criticism from the business community. Enterprises always
complain that while they have to face big difficulties in the production, banks
still can earn fat profit. In general, enterprises now have to borrow money
from banks at overly high interest rates of over 20 percent per annum, while
they believe that banks should have eased the interest rates in order to share
difficulties with enterprises.

Tran Du Lich,
Member of the National Assembly’s Economics Committee, said that it is
necessary to look into bank profits from different angles. He said that one
should compare the profits with the banks’ networks, labor force and investment
capital, as well as the profits in other economic fields before making
conclusion about if the banks’ profits are low or high.

to Dr Nguyen Van Thuan, credit remains the key source of income for banks. In
the first quarter of 2011, the outstanding loans increased by 3.67 percent,
which was higher than the rate of the same period of the last year (3.34

The State
Bank of Vietnam
has set a cap on the deposit interest rates at 14 percent per annum, but the
ceiling interest rate on loans has been removed, thus allowing banks to raise
the lending interest rates in order to widen the interest rate margin. In
general, banks are lending at 18 percent per annum to fund production projects,
and at 20-27 percent per annum to fund non-production projects.

In fact, banks
have been trying to “dodge the laws” and offering the deposit interest rates at
higher than 14 percent in order to attract more deposits. However, Thuan has
affirmed that even in this case, the gap between the deposit and lending
interest rates is still high, which ensures big profits for banks.

Thuan has
also warned about the stability of the profits of banks. He said that the high
interest rates are clearly unbearable for normal businesses. However, many
businesses still borrow loans, accepting the high interest rates. The banks,
which provide loans at high interest rates, have to face high risks.

Despite big
difficulties, banks still set high targets for themselves, because they hope
that the interest rates would decrease gradually from the second quarter, when
the inflation is put under control.

ACB, for example, decided that it needs to obtain the pretax profit of 4100
billion dong for this year, an increase of 32 percent over 2010. Sacombank’s
board of management also submitted to the shareholders the plan to obtain the
pretax profit of 2800 billion dong in 2011, higher than the 2010’s level at
2600 billion dong.

Source: VnExpress

Provide by Vietnam Travel

Forced to tighten credit, banks still can obtain satisfactory profits - Business - News |  vietnam travel company

You can see more

enews & updates

Sign up to receive breaking news as well as receive other site updates!

Ads by Adonline