Many banks have reported good business performance in the first nine months of the year thanks to decreasing provision costs and rising income from services.

According to the consolidated financial statement of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), its net profit in the first nine months of the year was VND16.68 trillion (US$712.86 million), up 34 per cent against the same period last year.

Thanks to a decline in provision costs for risky loans from 36.2 per cent to 29.9 per cent, the bank’s pre-tax profit in the period surged by 47 per cent year-on-year to VND11.68 trillion, surpassing the pre-tax profit gained in the whole of 2017.

Vietcombank’s impressive result was also thanks to a high growth in the bank’s two core business segments, of which net profit from credit rose by 26 per cent to VND2.04 trillion and net profit from services surged by 34 per cent to VND2.63 trillion.

Vietcombank’s outstanding loans in the first three quarters rose by 15.6 per cent to VND627.95 trillion while mobilised capital reached VND773.4 trillion. The bank’s non-performing loan (NPL) ratio accounted for 1.18 per cent of the total outstanding loans.

Military Bank also reported acceleration in performance in the first three quarters with an impressive pre-tax profit of VND6 trillion, double the same period last year. The bank’s profit from services contributed VND1.69 trillion.

Vietnam International Bank (VIB)’s pre-tax profit in the period also skyrocketed by 176 per cent year-on-year to VND1.72 trillion, following great efforts put into tackling NPLs. VIB was among few banks that resolved all bad debts at the Viet Nam Asset Management Company (VAMC) in July so that it didn’t have to spend provision costs on the bad debts.

The nine-month result for Tien Phong Bank (TPBank) also came out at VND1.61 trillion, also doubling last year’s figure and achieving 75 per cent of its 2018 target.

TPBank’s representative believed that the bank was confident of meeting its goals this year, on the back of very strong business activities.

Smaller banks also posted high profits in the first three quarters. An Binh Bank (ABBank)’s pre-tax profit surged sharply by 54 per cent against the same period last year to more than VND658 billion while Viet Nam Thuong Tin Commercial Joint Stock Bank (VietBank) also reported pre-tax profit of VND301.6 billion, nearly four times higher than the same period of 2017.

Analysts at Ho Chi Minh Securities Company (HSC) estimated that total profits of listed banks in the first three quarters would increase by 41 per cent year-on-year. This forecast is based on the assumption that credit growth in the period was only 11 per cent.

According to HSC, credit growth in the last three months has slowed after rising quickly in the first half due to concerns over inflation. The State Bank of Viet Nam (SBV) instructed banks to control lending to high risk sectors such as real estate, consumption and securities.

However, with low credit growth, lending interest rates are on an upward trend, which may improve banks’ net interest income (NIM), HSC noted. After several months of remaining unchanged, lending rates started to rise in the last two months, leaving the rate to be 0.46 percentage points higher than by the end of last year.

Apart from this factor, the increase in non-interest income, irregular income and declining provision expenses contributed to the overall profit increase.

According to HSC, non-interest income of banks also tends to increase sharply thanks to increased service income and the contribution of new income streams such as insurance commissions.

Meanwhile, provision costs are on a downward trend. Based on HSC’s rough estimation, the overall provisioning expense for listed banks rose by only 10 per cent in the first nine months.

Pham Hong Hai, general director of HSBC also attributed the bank’s high profits in the first three quarters to a decrease in provision costs for NPLs of the banks, adding that NPLs at the banks reduced significantly compared with last year thanks to their efforts in dealing with bad debts. — VNS