Tellers at a VPBank office. Declining operation expenses and improved asset quality helped bolstered the bank's earnings in the first nine months of the year. — Photo courtesy of VPBank

The Vietnam Prosperity Joint Stock Commercial Bank (VPBank) maintained robust profit growth in the first nine months of the year, bolstered by reduced operation expenses and improved asset quality.

Pre-tax profit in the first three quarters rose 17.5 per cent year on year to VND7.2 trillion (US$309.6 million), the bank reported on October 21.

The bank reported its total revenue increased 19.1 per cent year on year to VND26.3 trillion in the nine-month period.

If abnormal income gained from insurance deals was excluded, VPBank posted a 23.9 per cent and 36.6 per cent increase of revenue and profit in nine months, respectively.

VPBank reported net interest income accounted for the biggest part of its total revenue, which rose 23 per cent year on year to VND22.4 trillion. The bank’s total lending increased by 14.7 per cent in nine months from last year’s figure. The rate was higher than the sector’s average of 8.4 per cent.

Meanwhile, income from financial services soared 93.4 per cent yearly to VND1.94 trillion.

The figures showed VPBank had been doing well to diversify its income streams and lessen dependence on net interest.

Improved quality of assets

As of the end of September 2019, the non-performing loan (NPL) rate was 3.10 per cent, which was down from last year’s September-end rate of 4.24 per cent.

The bank’s NPL rate includes the rate of the consumer lender FE Credit, which fell to 5.21 per cent at the end of the third quarter from last year’s 6.36 per cent.

VPBank alone cut its NPL rate to 2.45 per cent in the nine-month period.

One of the ways to settle NPLs or bad debts is to sell them to the Vietnam Asset Management (VAMC) in return for VAMC bond notes.

VPBank said it had curbed the value of VAMC bonds to below VND908 billion in September from VND3.1 trillion at the end of 2018.

The bank expected keeping a low NPL rate and enhancing the settlement of VAMC bonds in 2019 would help improve the quality of assets, assuring stable profitability for the bank in the future.

Improved operation

Combined operation expenses in the first nine months increased by 17.3 per cent from a year ago but it was lower than revenue growth of 19.1 per cent.

That helped reduce the cost-income ratio (CIR) to 34.7 per cent at the end of the third quarter from 35.8 per cent recorded in the first half of the year.

The result was achieved by changing the operation model in the nine-month period, the bank said.

The parent bank could optimise all operation expenses, keeping expenses growing by 11.6 per cent year on year and reducing operation costs by 4.3 per cent on a quarterly basis. The parent unit’s CIR was reduced to 38.8 per cent at the end of September from 41.3 per cent made at the end of June.

Solid profit growth also helped lift efficiency indicators at VPBank.

The return-on-total asset (ROA) ratio at the end of September was 2.3 per cent, a 0.2 percentage point higher than the rate made in the first six months.

The return-on-equity (ROE) ratio was 20.4 per cent in the third quarter, up from 19 per cent recorded in January-June period.

In addition, the Basel II capital adequacy ratio was still higher than the State Bank of Vietnam (SBV) standard of 8 per cent.

The improvement of operation efficiency and asset quality would be a profound basis for VPBank to continue growing in the last quarter of the year and months to come. — VNS