Why do banks make huge profits?
A series of banks announced profits of thousands of billions in 2017, led by Vietcombank with pre-tax profit reaching 11,018 billion VND, up 32.9% over the previous year.
In 2017, many banks achieved large profits thanks to increased credit and reduced bad debt... In the photo: at a transaction counter of a bank in Ho Chi Minh City - Photo: Q. DINH
The 2017 profit figure is the highest a commercial bank has achieved to date.
Notably, Vietcombank's pre-tax profit before risk provisions reached VND17,206 billion, up 17.5% over the same period in 2016 and exceeding the set plan.
Similarly, BIDV also announced a record profit with consolidated pre-tax profit of the entire system reaching 8,800 billion VND, while Vietinbank reached more than 9,200 billion VND.
Some other banks saw pre-tax profits increase by 40-169%. For example, Military Bank (MB) reached VND5,355 billion, up 44.3% over the previous year.
A series of banks such asEximbank,TPBank and HDBank also exceeded their profit targets by quite a lot.
There are many reasons why banks have achieved positive business results. For example, at Vietcombank, by the end of 2017, bad debt on the balance sheet decreased by VND705 billion.
For Sacombank, in 2017, it handled 19,000 billion VND of bad debt, of which the sale of three assets related to Mr. Tram Be's group in Long An alone brought in 9,200 billion VND.
Associate Professor Dr. Tran Hoang Ngan, Director of the Ho Chi Minh City Academy of Officials, said that the 2017 profits of banks were the result of sacrificing profits in many previous years due to having to use profits to set aside provisions to handle bad debts, and shareholders were not given dividends... Now the set aside portion has been reversed, creating what is called an extraordinary profit for banks.
Besides, divestment also brings large profits to some banks, for example Vietcombank has earned more than 513.14 billion VND from selling shares at Saigonbank, Cement Finance Company...
In addition, banks also apply many cost-saving measures.
Faced with news of large profits, some banks are planning to pay higher dividends.HDBank plans to pay dividends in cash and bonus shares at a rate of 25-30%.
OCB's leaders said the 2017 dividend will be around 15%, higher than the 10% of last year. Another joint stock bank based in Hanoi also plans to raise its dividend from 12% to 15%...
Regarding lending interest rates, after Resolution 01 of the Prime Minister and the direction of the State Bank, some banks have begun to reduce lending interest rates by 0.5-1% for businesses in 5 priority sectors such as small and medium enterprises, startups...
However, most banks said that although profits were high in 2017, they still had to continue to handle bad debts and restructure, so reducing lending interest rates would mainly be for priority subjects and would be difficult to apply widely.
MSc. Do Gioan Hao, lecturer at the Faculty of Taxation and Customs, University of Finance and Marketing, predicts that in 2018, Resolution 42 will continue to be effective, helping banks quickly handle bad debts.
But Mr. Hao still noted that banks must strictly control cash flow and limit capital investment in risky or overheated areas to avoid generating more bad debt as has happened before.
