Banks are confident about meeting their profit targets for 2018 despite the central bank curtailing credit expansion in the second half of the year.

The State Bank of Viet Nam (SBV) sets a credit growth limit for each commercial bank depending on the bank’s health at the beginning of the year. Many banks have already used up nearly almost of their assigned credit quota for 2018.

LienVietPostBank has had to adjust its profit target down in 2018 from VND1.8 trillion (US$76.60 million) to VND1.2 trillion after SBV Governor Le Minh Hung affirmed the central bank would not adjust the credit growth limits for banks.

However, LienVietPostBank is the only bank to lower its profit target to date. Other banks, which also had high credit growth rates in the first half of the year, have so far still kept their targets unchanged.

According to industry insiders, the banks were optimistic as they had met more than a half of the annual profit targets in the first half of the year, while the second half of the year was the peak season for the banking industry.

For example, Vietcombank earned VND8 trillion in pre-tax profit in H1, meeting 57 per cent of its yearly plan. H1 profits for Military Bank and Vietnam International Bank (VIB) were also high at VND3.83 trillion (56 per cent of annual plan) and VND1.15 trillion (57 per cent).

Some small banks have reported even more impressive profits. Nam A Bank posted VND292 billion in pre-tax profit, equal to 97.3 per cent of the profit projected for 2018.

According to Nguyen Dinh Tung, director of Orient Commercial Joint Stock Bank (OCB), the bank had little more room for credit growth, but was confident about meeting its pre-tax profit target of VND2 trillion for 2018 after earning over VND1.3 trillion in the first half.

Tung said to meet the target, OCB would also focus on expanding credit segments for private customers to improve net interest margin. Currently, interest rates on small loans are typically 1-2 per cent higher than large loans. Even with consumer loans, interest rates can be twice that of corporate loans, helping to increase profitability when credit room is limited.

To offset the income deficit, TPBank said that it would try to raise revenue from services and other non-credit income sources besides strictly controlling management costs to reach its pre-tax profit target of VND2.2 trillion for 2018. In the first six months, TPBank earned more than VND1 trillion in pre-tax profit.

Other banks said in the context of limited credit room, along with rising revenue from services, they would enhance debt recovery to have more room for credit to ensure business targets were met.

Analysts also commented that healthy banks would still be able to make high profit while there was no need to increase lending. They could earn profit from payment services, foreign currency trading and other operations.

Banks could also increase profits by either cutting operational costs by improving productivity and reducing unnecessary expenses, while improving the quality of loans, they recommended.

Ho Chi Minh Securities Company predicted that the total post-tax profit of listed banks would grow by 32.28 per cent in 2018. — VNS