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Banks hope to see profit increasing in last months of year   2010-06-08 - Dau tu chung khoan

Commercial banks have announced more satisfactory profit for May after an unsatisfactory first quarter. However, bankers say they are still far from reaching their targeted profit levels.

 

 

 

Credit grows slightly by 8 percent

 

Lending remains the main source of income for banks, since bank services have not developed well enough. Meanwhile, bankers said income from lending has decreased, which explains why banks’ profit is not really high.

 

The State Bank of Vietnam has asked commercial banks to reduce lending interest rates in order to help businesses more easily access bank loans. The current lending interest rates have been eased by one percent per annum from the previous month to 12-14 percent for short-term loans and 13-16 percent for medium and long-term loans. Meanwhile, bankers say they have to maintain high deposit interest rates in order to attract depositors, which means the margin between lending and deposit interest rates and profit have been narrowed

 

Vietcombank, for example, said that with the current lending interest rate of 12.5-14 percent per annum, the profit the bank gets from lending has decreased, when Vietcombank cannot reduce deposit interest rates. The bank thinks that its income from lending in 2010 will decrease by 1000 billion dong.

 

According to the State Bank of Vietnam, the total outstanding loans in the first five months of the year increased by eight percent over the beginning of the year. Analysts said the low credit growth rate means low income for banks.

 

General Director of OCB Bank Tran Van Vinh said the bank got 140 billion dong worth of pretax profit in the first five months of the year, an increase of 28 billion dong over the previous month. Profit will likely be ‘modest’ given that the bank plans to obtain 400 billion dong in profit in 2010.

 

Meanwhile, General Director of Viet A Bank Pham Duy Hung said the lending activities of the bank in the first five months of the year have not been much improved. Therefore, the bank is now under hard pressure to obtain a profit of 498 billion dong in 2010, an increase of 82 percent over the previous year.

 

Hung declined to reveal the profit the bank obtained in the first five months of the year, but he said that if the lending situation cannot be improved, the bank may not obtain its targeted profit in 2010.

 

Sacombank has reportedly obtained 966 billion dong worth of pretax profit in the first five months of the year. Meanwhile, the bank expects to obtain 2800 billion dong in profit in the whole year 2010.

 

Chairman of Vietcombank Nguyen Hoa Binh also said that the profit of the bank in May was also ‘modest’. The bank has got 2000 billion dong in profit in the first five months of the year. This means that there are still many things the bank needs to do to obtain the targeted profit level of 4500 billion dong this year.

 

Banks put high hopes on the last months of year

 

Banks hope their lending activities will be more bustling in the last months of the year, which they expect will bring higher profit to them. In general, demand for capital increases in the last months of the year, which they feel will lead to higher outstanding loans and higher profit for banks.

 

However, analysts have pointed out that it would not be easy to increase outstanding loans in the upcoming months.

 

Nguyen Duc Vinh, General Director of Techcombank, said the biggest problem now is that it is more and more difficult nowadays to find feasible investment projects to lend.

 

Vinh from OCB Bank also said it is not easy to expand the lending market share.

 

According to Chairman of Vietcombank Nguyen Hoa Binh, lending interest rates have been decreasing as per request by the State Bank of Vietnam. However, lower lending interest rate does not always means that the outstanding loans will increase.

 


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