Banks declare lower profits for October

VNStockNews.com - Commercial banks profits have proved to be lower than previous months as was anticipated.

In the first months of the year, banks updated information about profits regularly. However many are yet to provide figures for October even though November is nearly over. Analysts say it’s because figures are not as “beautiful” as previous months.

In general, banks always see higher profit in the last months of year. However, this year is different. A lot of joint stock banks have reported a slowdown in profit in September and October.

Maritime Bank, for example, which declared impressive profits for mid-year months, has reported a more modest 80 billion dong only for October

According to Sacombank, the profit in the third quarter of the bank decreased by 15 percent from the second quarter, while Saigon-Hanoi Bank’s (SHB) third quarter’s profit was just a half of that in the second quarter.

Analysts have pointed out that decrease in revenue from credit was the main reason behind the profit decreases. Banks now have to offer high deposit interest rates to attract more capital, while they cannot lend at more than 10.5 percent. Banks have been tightening credit since September, since they have limited capital resources.

In the latest move, the State Bank of Vietnam (SBV) has raised basic interest rates from seven to eight percent per annum, thus raising the ceiling lending interest rate to 12 percent. The move is hoping to help commercial banks improve liquidity and widen the margin interest rate. However, bankers say they have only one month more to enjoy the new mechanism.

Though banks’ reports show decreases in October, they are still confident about the possibility of fulfilling yearly business plan.

ACB got 1,800 billion dong profit in the first nine months of the year and it expects to get 600 billion dong more in the last three months. Techcombank has predicted profits of 2,245 billion dong, an increase of 500 billion dong over 2008.

Big joint stock banks, though facing difficulties in expanding credit, still can obtain big profits from non-credit services. The revenue from non-credit services now accounts for 50 percent of total revenue at Asia Commercial Bank (ACB) and Techcombank and 40 percent at Sacombank.

However, Techcombank’s General Director Nguyen Duc Vinh said that if the deposit interest rate had not increased so dramatically which made the capital cost increase, the bank’s profit would have been much higher.

Earlier this year when banks were posting high profits some experts gave warning that they would decrease towards the year end if banks relied too much on credit. The warning has become true now.