2018 is starting to reveal huge profit figures for the Vietnamese banking system, scales never achieved in history - Photo: Quang Phuc.

Techcombank opened the industry congress season, marking the first time in the history of the Vietnamese private joint stock commercial bank system that it planned to make a profit of up to VND10,000 billion.

At the press conference at the end of 2017, Mr. Nguyen Le Quoc Anh, General Director of Techcombank, explained: the sudden profit increase last year as well as continuing this year is normal, not hot growth.

Because after handling bad debts and backlog assets, bank profits are accounted for more completely and are not cut as much by provisioning costs as before. It is not a hot growth, because revenue has still grown quite high in recent years, and with less provisioning, profits continue to follow the scale of that revenue.

As above, for the first time in Vietnam's history, a private bank has set a profit plan of 10,000 billion VND. And this expected scale is not the highest in terms of absolute value.

According to documents prepared for the upcoming general meeting of shareholders, Vietnam Prosperity Bank (VPBank) has set a target profit target of up to VND10,800 billion this year.

In recent years, VPBank has had to continuously adjust its targets during implementation, because… the set targets were all exceeded early.

"The initial plan is based on resource allocation. When implemented, if the bank actually does better, it will be adjusted up. When there are difficulties, it will also have to be adjusted down. So that adjustment is also normal," Mr. Nguyen Duc Vinh explained to VnEconomy.

As at Techcombank, VPBank's General Director believes that the growth rate in the past and this year is not necessarily hot. Because the main activities have reached a high level, as well as the bank always has to comply with the limits of the State Bank.

For example, credit growth cannot be increased by each member, but must follow the target controlled by the State Bank. Similarly, capital use must also be measured, such as compliance with technical barriers such as loan-to-deposit ratio, ensuring minimum capital safety ratio, etc.

Of course, during operation, any bank, including from shareholder requirements, needs a certain level of growth.

As at the Bank for Foreign Trade (Vietcombank), Mr. Nghiem Xuan Thanh said that initially the expected profit target was only 12,000 billion VND, but considering that level had a "slightly low" growth rate, the target submitted to the shareholders' meeting is expected to be raised to 13,000 billion VND, to have a better growth rate.

With the above expected targets, 2018 is starting to suggest huge profit figures for the Vietnamese banking system, scales never achieved in history.

Initially, as above, Vietcombank will probably continue to be the champion in terms of absolute profit. The other two major members, the Industrial and Commercial Bank (VietinBank) and the Bank for Investment and Development (BIDV), have not yet disclosed specific targets.

Meanwhile, with Techcombank and VPBank, this year's big wave of banking profits has begun to show the emergence and potential dominance of the private sector. Accordingly, it is forecasted that 2018 will be the first year the market will witness private banks with lower capital scale, much lower total assets but official profits equal to, and possibly even surpass, some members of state-owned commercial banks.

As in the case of Techcombank, in addition to profits closely following revenue, the handling of bad debts and backlog assets also comes with the potential to reverse provisions back into profits.

That prospect is also present at the Military Bank (MB). During the period 2011 - 2014, MB led the profit of joint stock banks without a controlling State ownership ratio. In 2017, MB focused on paying off all bad debts sold to the Vietnam Asset Management Company (VAMC).

MB is expected to hold a general meeting of shareholders at the end of March 2017. After fully paying off the debt at VAMC, the market is waiting to see whether this member has the prospect of determining this year's profit target close to the members who were behind in the previous period such as Techcombank and VPBank or not?

By April 2017, most commercial banks will officially enter the congress season. Profit targets will be announced one after another. Initially, there have been expected growth rates of 25-30%, with some cases announcing targets of over 60% growth, such as Ho Chi Minh City Development Bank (HDBank).

And normally, profit targets are numbers built on the basis of feasibility and safety. If we continue to exceed targets as was common in 2017, then 2018 will truly be a year of great profit waves for Vietnamese banks.