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Commercial banks expect tough road ahead   2008-02-04 - VNS

Viet Nam's commercial banks posted above-expected revenue for 2007 but are sanguine about their profit prospects for the next few months.

HA NOI — Viet Nam’s commercial banks posted above-expected revenue for 2007 but are sanguine about their profit prospects for the next few months.

For example, Asia Commercial Bank’s (ACB) revenue was around VND1.87 trillion (US$116.87 million) for the entire year against a forecast VND1.4 trillion ($87.5 million).

VIB Bank generated yearly revenue of VND425 billion ($26.56 million), up 213 per cent against 2006, while Techcombank earned VND709 billion ($41.31 million).

The figures were achieved after a year in which the banks found themselves competing for capital during a stock market boom only to see the value of their own shares decline before a pre-Tet bounce.

Techcombank, Eximbank, and Military Bank shares were among those to rise.

"The positive trend for bank shares is common to all shares on the market, which is warming up," said Saigon Securities Inc CEO Nguyen Duy Hung. "I must confess that the banking sector has performed very well."

Now for 2008

But what of 2008? Bankers at the latest economic meetings have made it plain they expect a difficult year.

The global finance was complicated and dramatic and Viet Nam’s senior regulators might have to use a variety of monetary policies to protect the domestic market against external volatility, Techcombank general director Nguyen Duc Vinh told the Viet Nam: A Rising Star conference early last month.

The stock market has tumbled; the credit crisis sparked by the collapse of the United States mortgage market has spread and the gold price fluctuates by the hour.

The State Bank of Viet Nam ordered commercial banks to increase their compulsory reserves by an additional 1 per cent last month as a hedge against risk and to tighten money supply.

It also required the banks to maintain risk provision funds against such loans equal to 200-250 per cent of the value of the collateral, up from the current ratio of 150 per cent.

State Bank Directive No 3 intended to tighten commercial-bank loans against shares had already denied them a major source of revenue.

The commercial banks lifted their lending to offset the central bank’s directive that limited loans for shares to no more than 3 per cent of all lending and credit growth immediately overheated.

Now there are fears of another war among the commercial banks to raise their charter capital, as the central bank on Friday decided to cap securities lending at 20 per cent of the banks’ charter capital.

Rates rise

The central bank raised three key rates, the prime lending rate to 8.75 per cent, the discount rate to 6.0 per cent and refinancing rate to 7.5 per cent on Wednesday.

The over-night interbank rate for dong loans jumped to 27 per cent on Thursday, January 31, the highest for decades.

Yesterday, the VIB and VP banks raised their interest rate for deposits.

With nine newly-established banks that are subsidiaries of giant financial companies and corporations about to join the fray, clear strategies for the year are still being designed.

The foreign banks awaiting central-bank approval before they come in will not make life for the commercial banks any easier.

As a senior central bank official, who asked for anonymity, said yesterday: "No one can be sure of solid bank profits over the next months." — VNS

Financial reports of commercial banks in 2007

Bank

Charter
capital

Total assets

Pre-tax
revenue

Growth (%)

Deposits

Outstanding
loans

ACB

2,630

87,000

1,871

183

75,300

31,600

Agribank

NA

320,000

NA

NA

NA

281,869

BIDV

NA

204,992

2,112

57.8

NA

NA

MHB

NA

NA

NA

NA

24,031

12,723

Military Bank

2,000

31,000

110

145

23,010

10,000

Sacombank

4,449

63,484

1,452

167

54,041

34,316

SeABank

3,000

26,300

410

300

20,249

11,041

Techcombank

2,524

39,558

709

NA

34,586

20,188

VIB Bank

2,000

39,318

425

213

NA

16,744

Vietcombank

15,000

196,117

> 2,056

-16.8

143,635

95,579

Vietinbank

NA

180,000

1,450

80

128,200

153,400

VP Bank

2,000

18,200

313

200

15,355

13,217

Unit: VND billion


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