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Banks’ big profits please banks but grieve businesses   2009-07-08 - VNE

Commercial banks have gladly announced high profits for the first six months of the year. However, the banks’ joy has made businesses feel touched, since businesses have been promised by banks that they can share profit and success with banks.


Techcombank has announced profits of 1,031 billion dong ($60 million) for the first six months of 2009, which make it one of the most profitable joint stock banks. Military Bank announced profits of 720 billion dong, leaving it only 100 billion dong short of its  target for the year. 


"Our profit has dropped so dramatically since May. Some of that was due to fluctuating exchange rates, but still I feel sad.

“Today (June 23), I need $30,000, and the bank told me that I must pay an additional 550 dong for each dollar, a so-called ‘foreign currency conversion fee.’

“This is the highest fee level so far.  I can’t understand why I have to pay the 550 dong? Maybe my knowledge is not deep enough?

Excerpt from a businessman’s letter to VNExpress 

Ten other banks have also reported that they were well ‘in the black’ for the first half of 2009.  Analysts still await reports from two big names in joint stock banks, Sacombank and ACB.  A source from ACB said the bank’s first-half profits are estimated to reach 1,200 billion dong. Meanwhile, Sacombank’s profits are estimated at 900 billion dong.


The high profit announced by banks in these difficult times has caused businesses to feel sorry for themselves.  The director of a business commented bitterly to a VNExpress reporter that “the banks all say they will share difficulties, profit and success with businesses. Meanwhile, while businesses have been struggling with crisis and many of are reporting losses, some are on the verge of bankruptcy, but banks still reap fat profits.”


Commercial banks themselves well understand what businesses think. Many are thus wary of publishing details about their profit.  A senior manager of a joint stock bank told a reporter that though he was happy with his bank’s successs, he did not want the local press to report about it. One bank is rumored to have deliberately lowered its announced profit in 2008.


The director of an import company in HCM City sent a letter to VNExpress, confiding that he was compelled to purchase dollars from banks at prices two or three percent higher than the officially quoted prices. He said a lot of his friends, also businessmen, have met difficulties in purchasing foreign currencies.  If the businesses did not agree to purchase foreign currency at the high prices, they would not have money to make payment for the foreign partners.


Bank reports show that core banking services, including the money exchange trading and lending have brought the biggest profit to banks. Traditional services made up 70 percent of Techcombank’s  total profit, while the rest came from investments like bond or gold trading.


Loans still make up 50 percent of Techcombank’s total turnover, and 60 percent at Military Bank.


Commented about the banks’ high profit, Banking Academy Deputy Director To Kim Ngoc, said that banks almost never post a loss.  Lately they have been profiting from the Government’s demand stimulus package.  Trading in the interbank monetary market has also brought considerable profit to banks. More profit flows in from loans with high interest rates under contracts signed some time ago, or from bond trading.


“If banks can make fat profits while businesses have difficulties, it’s a reflection of the injustice in sharing profit in the society,” Ngoc said.  However, she said, it is impossible to force banks to ‘sacrifice’ profit for businesses. Besides, banks must not be allowed to go bankrupt, because this will badly affect the whole banking system and the national economy.


Ngoc is not as optimistic as other experts about the business results banks will report in the second half of 2009.  She noted that Vietnamese businesses have not yet felt all the follow-on shocks from the global economic crisis.  Also, Vietnamese businesses and banks have been enjoying big support from the Government. Once the support is reduced, businesses may face bigger difficulties. The big loans banks are providing now could become a burden on them later, if businesses, unable to sell their products in shrinking export markets, cannot pay their debts to banks

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