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Vietnamese banks in difficulties, but still can catch covetous glance   2012-03-05 - VietNamNet

The governor of the State Bank of Vietnam many times affirmed that the banks’ profitability is not really high, if compared with their huge stockholder equity. However, bank shares are always being hunted, while foreign investors are ready to inject money in Vietnamese banks.

Vietnamese banks not only make profit

Habubank in mid February released a report showing that the bank incurred the loss of 54.6 billion dong in the fourth quarter of 2011, while it made a profit of 123 billion dong in the fourth quarter of 2010. Though the bank still could obtain the pretax profit of 347.5 billion dong, the figure would be unsatisfactory, because this represents a 42.2 percent decrease in comparison with the same period of the last year.

Habubank was the first bank that declared pretax loss for the fourth quarter of 2011.

This shows that in the economic difficulties, the unprofitability can also occur with banks, though banking is always considered the most profitable business field.

The finance report of Habubank shows that the bank incurred loss partially because of the foreign currency trading and the increased operation costs.

Especially, the operation costs of the banks doubled that of the same period of the last year: 679.8 billion dong vs. 300 billion dong, though the scale did not increase significantly.

Analysts have warned that this is the same problem of many other banks which once focused on foreign currency trading, real estate and securities investment in 2011.

Small banks are believed to be the ones that most suffer, because they had to face the weak liquidity in the second half of 2011 and had to borrow money at high interest rates on the interbank market. The small banks’ costs spent to mobilize capital from the public were also higher than that of bigger banks.

In November 2011, when answering National Assembly’s Deputies, Governor of the State Bank Nguyen Van Binh said that the bank profits are not as high as people think.

According to Binh, a medium scale bank now manages the total assets of 50-60 trillion dong. With such a huge capital, the profit of hundreds of billions of dong should not be considered “high”.

Meanwhile, experts have pointed out that some banks have been fallen into uncertainties, because they have to use short term capital for long term loans. The most evident proof that shows that the banking system has problems is that the State Bank of Vietnam has decided to restructure the banking sector.

Banks still desired

Despite the disadvantages, bank shares are always being hunted by investors, especially long term investors.

Habubank shares on February 24 saw the prices climbing to the ceiling level for the second consecutive trading session. Other bank shares on the HCM City and Hanoi bourses also increased sharply in prices, including Military Bank’s shares, and Saigon-Hanoi bank shares.

Investors once thought that the Sacombank share price increase wave had stopped, after Eximbank announced it had had 51 percent of Sacombank shares. However, the shares once again saw the prices surging to 19,600 dong per dollar on February 24.

In the past, when the stock market was on the darkest days, and the prices of all stocks decreased, bank shares still could be sold at good prices, which explained why bank shares are called the “king share.”

Why do investors still want bank shares, even though their profits are not really high and they are still facing a lot of difficulties?

Analysts have commented that Sacombank’s profit is not “ideal” for such a leading joint stock bank in Vietnam. However, a series of the moves taken recently by the bank, including the buying of treasury stocks at high prices, delaying the shareholders’ meeting, or the plan to increase capital; partially can show Sacombank’s value is very high.

Keith Pogson, a senior executive of Ernst & Young Asia-Pacific, said on Dau tu that foreign investors now show special interests in Vietnamese banks.

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