Bank profits slow down

No more "huge" profits

Although it is almost the end of July 2023, many commercial banks have not yet announced their second quarter financial reports. However, looking at the results of the recently announced commercial banks, profits are not optimistic.

Specifically, Bac A Commercial Bank (Bac A Bank), pre-tax profit in the second quarter of 2023 reached nearly 139 billion VND, down 25% compared to the same period in 2022. Of which, operating costs (staff, interest payments on deposits...) increased by 73% and bad debt increased by nearly 31.2% to 679 billion VND (rate from 0.55% to 0.71%)... "eroding" profits.

Similarly, despite a cautious business plan, at the end of the second quarter of 2023, Tien Phong Commercial Bank (TPBank) had a pre-tax profit of nearly VND 3,400 billion, down 10.3% year-on-year and less than 50% of the expected 2023 plan of VND 8,700 billion. Lien Viet Post Commercial Bank (LPBank) recorded a profit in the second quarter of 2023 of only VND 880 billion, down 51% year-on-year. Accordingly, in the first 6 months of 2023, the bank's accumulated profit reached VND 2,446 billion, down 32%.

The main reason is that most business segments are less active, net interest income decreased. ABBank also recorded consolidated after-tax profit in the second quarter of 2023 of only VND 53 billion, down 94% over the same period. Accumulated profit in the first 6 months of 2023 reached only VND 541 billion, down 59%...

Although less than 10 commercial banks have announced their business results so far, according to SSI Securities Company's estimates, 4/11 listed commercial banks studied by SSI will see a decrease in profits in the second quarter of 2023 compared to the same period last year.

Specifically, in addition to TPBank, the other 3 banks are Asia Commercial Bank (ACB), Vietnam Technological and Commercial Bank (Techcombank) and Vietnam Prosperity Bank (VPBank). Some banks recorded increased profits such as BIDV, VietinBank, Vietcombank, MB... but the profit growth rate was not too high compared to the same period or even remained the same.

According to SSI, bank profits continue to grow but at a significant deceleration. The after-tax profits of 11/27 listed commercial banks maintained growth compared to the same period with an increase of 3.5% but significantly lower than the increase in the first quarter of 2023 of 11.6%.

"Suffering the blow" due to economic difficulties

The main reasons why bank profits are no longer "huge" in the second quarter of 2023, according to experts, are due to narrowing net interest income (NIM), low credit growth, and sharp increases in credit risk provisions.

The leader of a commercial bank whose profits in the first 6 months of 2023 decreased said that the bank's profits were "eroded" not only due to a decrease in interest income due to low credit in the first half of 2023, but also in the context of a difficult market, the bank's bad debts also increased, forcing the bank to increase risk provisions. All of this "ate" into the bank's profits. "One of the other reasons for the slowdown comes from the difficulty in handling bad debts to recover capital due to the frozen real estate market. Meanwhile, real estate is the main collateral for most loans," he said.

In a recently published report, analysts from Vietcombank Securities Company (VCBS) said that pre-tax profits for the entire banking industry this year are expected to reach only about 10%, a sharp decrease compared to last year. Factors affecting the industry's business results, in addition to low credit this year, are also the decline in non-interest income in most major activities compared to the same period last year. In particular, income from cross-selling insurance (bancassurance), which accounts for about 30% of banks' service income, has been affected due to regulatory agencies stepping up inspections of insurance sales and people's incomes decreasing.

VCBS experts assessed that bank profits are expected to continue to be strongly differentiated, some small-scale banks will continue to slow down, even have negative growth in case the real estate market and the world situation worsen, causing credit to slow down, making it difficult for customers to recover their debt repayment ability.

However, there are still a few commercial banks with good business results mainly due to increased credit and reduced provisioning due to good bad debt control.

Specifically, as of June 30, pre-tax profit of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) reached VND4,755 billion, up 63.5% over the same period. The reason is that Sacombank actively implemented preferential loan packages, so outstanding credit increased, reaching more than VND460,000 billion, up nearly 5%. Along with that, operating costs also decreased, especially handling and controlling bad debts well. Vietnam Maritime Commercial Joint Stock Bank (MSB) had a consolidated pre-tax profit of VND3,548 billion in the first 6 months of 2023, equivalent to 56% of the yearly plan. In particular, strong credit growth helped MSB's net revenue in the first 6 months of the year increase by 23.2%.

These are positive signals, but in general, many banks are having difficulty doing business in the context of "having a lot of money" as the State Bank's leaders have just informed, which is a cause for concern. Decisively reforming administrative procedures and supporting businesses in investment and production, according to many experts, is a fundamental solution that not only helps banks do business well (pay more taxes to the State) but also helps boost the economy to overcome current difficulties.

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