The profitability of Vietnamese banks has improved significantly, driven by growth in core income and robust macroeconomic conditions.

A report from the State Bank of Viet Nam (SBV) released this week showed the return on assets (ROA) ratio of the domestic banking system surged to 0.7 per cent by the end of November last year from 0.57 per cent at the end of the previous year while the return on equity (ROE) ratio also increased by 1.42 percentage points to 9 per cent.

Finance and finance leasing companies had the highest ROA ratio in the system, with 3.02 per cent. However, the rate decreased compared to the 3.57 per cent level recorded at the end of 2017. The companies also topped in ROE with 13.83 per cent.

The group of policy banks ranked second with the ROA ratio of 1.02 per cent while cooperative banks had the lowest ROA at 0.42 per cent.

The ROA ratios of State-owned and joint stock commercial banks were low at only 0.52 per cent and 0.76 per cent, respectively, much lower than the average rate of the entire industry. However, industry insiders said the big gap in the ROA ratios of commercial banks and financial companies was predictable as financial companies often hah higher profit margins than state owned banks’ while their asset size was much smaller.

The SBV report also showed total assets of credit institutions and foreign banks’ branches in Viet Nam by the end of last November surged by 8.23 per cent against the beginning of the year to VND10.8 quadrillion (US$463.5 billion).

Of the total assets, State-owned banks, including Agribank, Vietcombank, VietinBank, BIDV, GPBank, CBBank and OceanBank, made up VND4.8 quadrillion, increasing by 5.18 per cent and accounting for 44 per cent of the banks’ total assets.

The figure for joint stock commercial banks was VND4.19 quadrillion, up 9.07 per cent, while it was VND154.89 trillion for finance and finance leasing companies, up 9.15 per cent.

Notably, last year saw the assets of joint venture banks and wholly foreign-owned banks surge sharply by 18.34 per cent to VND1.1 quadrillion.

Besides the assets increase, equity capital of credit institutions and foreign banks’ branches in Viet Nam also rose by 10.02 per cent to VND785.66 trillion.

With regards to the capital adequacy ratio (CAR), all credit institutions mentioned above have CAR at above the 9 per cent limit, of which the ratio at State-owned banks was 9.33 per cent and joint stock commercial banks was 11.13 per cent.

The short-term capital for mid- and long-term lending ratio at State-owned and joint stock commercial banks was reported at 31.43 per cent and 33.77 per cent, respectively, which helped the banks meet a central bank requirement to lower the rate to below 40 per cent from 2019. — VNS