Bank stocks continue to lag despite lenders posting positive profit growth.
A bright picture
The National Citizen Commercial Joint Stock Bank (NCB) reported a before-tax loss of VND199 billion in the third quarter, while it earned VND80 billion in the same period last year. The loss resulted from profit withdrawals, the stoppage of preparing financial projections and setting aside money for overdue and bad debts as regulated by the central bank, appropriations under restructuring plans and the continuation of interest-support policies for Covid-19-impacted clients.
However, the loss of NCB or a decline in profit of the An Binh Commercial Joint Stock Bank (ABBank) did not represent the financial health of the banking sector, as most banks posted positive growth in the third quarter.
Asia Commercial Joint Stock Bank’s (ACB) profit before tax in January-September topped VND13.5 trillion, skyrocketing 51% over the same period last year and hitting 90% of the full-year plan. The bank gained over VND4.4 trillion in the third quarter alone, up 71% year-on-year.
Vietnam Prosperity Joint Stock Commercial Bank (VPBank) recorded 69% profit growth in the first nine months, at VND19.8 trillion, and 67% in the third quarter, at VND4.5 trillion, over the same period last year.
Tien Phong Commercial Joint Stock Bank (TPBank) made VND5.9 trillion in before-tax profit in the year through September and VND2.1 trillion in the third quarter, picking up 35% and 54% year-on-year, respectively.
Lien Viet Post Joint Stock Commercial Bank’s (LienVietPostBank) before-tax profit surged by 71% in the nine-month period and 61% in the third quarter against the same period of 2021, at over VND4.8 trillion and VND1.2 trillion, respectively.
Vietnam International Commercial Joint Stock Bank (VIB) estimated its before-tax profit in three quarters at VND7.8 trillion, up 46% year-on-year, and profit from July to September saw the figure double in the same period last year, at over VND2.7 trillion.
Southeast Asia Commercial Joint Stock Bank’s (SeABank) profit was expected to reach VND4 trillion, increasing 59% year-on-year.
Vietnam Technological and Commercial Joint Stock Bank (Techcombank) said in its third-quarter financial statement that before-tax profit rose by 22% in the year to September and 21% in the third quarter alone, at VND20.8 trillion and VND6.7 trillion, respectively.
Vietnam Maritime Commercial Joint Stock Bank posted VND4.8 trillion in nine-month profit before tax and nearly VND1.5 trillion in the third quarter, up 17% and 47% year-on-year.
Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank) recorded profit growth of 36% from January-September and 117% in the third quarter versus the same period of 2021, at VND536 billion and VND148 billion, despite it having set aside VND209 billion for credit risk, a 2.7-fold increase over last year.
Petrolimex Group Commercial Joint Stock Bank (PGBank) also raised its provision 2.3-fold higher than in the same period last year, at VND220 billion, and saw a 42% before-tax profit surge from January to September and 46% in the third quarter, at VND387 billion and VND142 billion, respectively.
Strong growth momentum
The first positive influence on banks’ profit was their business expansion. Though credit growth slowed in the third quarter, banks’ outstanding loans tended to surge since early this year, enabling them to benefit from the trend.
Outstanding loans of ACB and TPBank inched up 11% over the start of the year, standing at over VND402 trillion and VND156 trillion, respectively. Meanwhile, the outstanding loans of other banks also edged up, with Techcombank picking up 18% to VND410.5 trillion, VPBank 13% to VND402.6 trillion, VietBank 14% and LienVietPostBank 9%.
The second influence is the positive results of non-interest income sources such as cross-selling products and non-performing loan recovery.
ACB’s profit from services in the first nine months soared 21% to VND2.6 trillion over the same period last year, while proceeds from other activities increased 12-fold to VND849 billion.
VPBank recorded a 4.4-fold increase in earnings from other activities, with nearly VND9.7 trillion thanks to a 58% surge in derivative instruments, at nearly VND2.1 trillion, other incomes skyrocketing 26-fold to some VND5.9 trillion and VND342 billion generated by debt sales.
Other sources of income also generated VND593 billion for TPBank, a 4.2-fold increase over the same period last year, and VND198 billion for VietBank, up 71% year-on-year, thanks to debt recoveries and down payment from real estate transfers.
In 2021, banks’ profits nosedived because they reduced or offered zero interest rates to support borrowers. However, their clients have improved business results this year as the Covid-19 pandemic was under control. Meanwhile, debt restructuring policies for enterprises impacted by the pandemic ended in June, helping banks escape pressures from interest exemption and reduction for Covid-19-affected clients.
Challenges
Though deposit rates have risen sharply, growth has accelerated over the past two months, especially after the central bank’s interest rate hikes. Thus, impacts on the cost of capital are still minor, as many banks have raised their medium- and long-term funds, thereby limiting the risk brought on by interest rate hikes. However, the capital cost will feel heavier from January next year as medium- and long-term deposits with high interest rates are due.
Tight liquidity, along with capital mobilization outstripping deposit growth pace, exerted pressure on banks’ attempts to raise funds. Take ACB for example. Loans rose by 11% while deposits only edged up a mere 3%, leading to loan balances at the end of the third quarter amounting to over VND402 trillion and exceeding the deposit amount at VND392 trillion. Other banks also faced the same problem as ACB.
Profit in the third quarter was much higher than the figure in the same period last year, but it was lower than in the previous quarters of 2022, as loan growth moved at a snail’s pace and the net interest margin narrowed while bad debts tended to rise, forcing banks to set aside more money for credit risk.
ABBank’s before-tax profit in the third quarter plummeted 92% over the previous quarter, VietBank was down 46%, LienVietPostBank 31%, SaigonBank 22%, ACB 9%, Techcombank 8% and TPBank 1%. In addition, profits of LienVietPostBank and Techcombank slipped 31% and 1% over the first quarter of the year.
