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Vietcombank plans zero growth on this year’s mobilization   2008-11-19 - SGT

The giant Bank for Foreign Trade of Vietnam, or Vietcombank, has sought shareholders’ approval to revise some scheduled business figures for this year, including no growth in mobilization for the year.

To share difficulties with enterprises, Vietcombank has cut lending rate to 13.5% per year, which has been the lowest in the market, so it also has to decrease the borrowing rate.

Besides mobilization, other targets have also been revised compared to the plan approved in the first general meeting of the bank in April.

Vietcombank’s total assets are expected to fall in the rest of the year as the total assets target by the year’s end is revised down to VND200 trillion from the initial VND211 trillion, although the number as of September already had amounted to VND209 trillion.

Nguyen Phuoc Thanh, CEO of the bank, told the Daily via telephone on Monday that the macro-economic fundamentals had been very volatile since early this year and banking industry had been affected the most alongside enterprises who were banks’ clients.

“Despite the mobilization does not grow, Vietcombank must look for good projects and enterprises to finance, so the bank decides to set a growth target of only 15% on outstanding loans this year,” Thanh said. The initial plan for outstanding loan growth is 29.2%.

In addition, to share difficulties with enterprises, Vietcombank has cut lending rate to 13.5% per year, which has been the lowest in the market, so it also has to decrease the borrowing rate.

“Decreased borrowing rates should affect the bank’s mobilization but Vietcombank will try to balance its capital sources and ensure the bank’s operation,” said Thanh.

However, the bank’s profit target is revised up slightly to VND3.4 trillion versus the earlier plan of some VND3.38 trillion. Vietcombank obtained a pre-tax profit of over VND3.42 trillion in the first nine months of the year.

Thanh explained the year’s planned profit was lower than that in the first nine months because the bank expected that provision for bad debts would increase for the rest of the year when it had to reschedule loans for enterprises as requested by the central bank.

When rescheduling a loan of one client, all credit given to that enterprise must be considered bad debts and banks have to extract provision for those bad debts. Provision for bad debts of the bank this year is to be 50% higher than Vietcombank’s expectation, Thanh said.

That is also why Vietcombank increases its non-performing loans (NPL) ratio from 2.6% to 5.8% by the year’s end. By late September, the bank’s NPL ratio was 5.55%, and the bank’s provision for overdue loans was VND3.5 trillion.

“Expecting the economy to face more difficulty by the year’s end and early next year, the bank has considered revising the year’s business targets, but shareholders’ benefit will not be affected because Vietcombank’s profit is higher than expectations,” he said.

By late September, Vietcombank’s equity was VND12.1 trillion and the planned equity by the year’s end is revised down to VND13.1 trillion from the initial target of VND15.5 trillion.

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