No more huge profits.
Although it's almost the end of July 2023, many commercial banks have yet to release their Q2 financial reports. However, looking at the results of those banks that have just released their reports, the profits are not promising.
Specifically, Bac A Bank's pre-tax profit in the second quarter of 2023 reached nearly 139 billion VND, a decrease of 25% compared to the same period in 2022. Operating expenses (employees, interest payments on deposits, etc.) increased by 73%, and bad debts increased by nearly 31.2% to 679 billion VND (from 0.55% to 0.71%), significantly eroding profits.
Similarly, despite presenting a cautious business plan, by the end of Q2 2023, Tien Phong Commercial Bank (TPBank) had pre-tax profits of nearly VND 3,400 billion, a decrease of 10.3% compared to the same period and less than 50% of the projected 2023 full-year plan of VND 8,700 billion. Lien Viet Post Commercial Bank ( LPBank ) recorded profits of only VND 880 billion in Q2 2023, a decrease of 51% compared to the same period. Accordingly, the cumulative profit for the first six months of 2023 reached VND 2,446 billion, a decrease of 32%.
The main reason is the poor performance of most business segments, resulting in a decrease in net interest income. ABBank also recorded consolidated after-tax profit of only VND 53 billion in Q2 2023, a decrease of 94% compared to the same period. For the first six months of 2023, profit reached only VND 541 billion, a decrease of 59%...
Although fewer than 10 commercial banks have announced their business results so far, according to estimates by SSI Securities Company, 4 out of 11 listed commercial banks studied by SSI will experience a decline in profits in the second quarter of 2023 compared to the same period last year.
Specifically, besides TPBank, which has already announced its results, three other banks are Asia Commercial Bank (ACB ), Vietnam Technological and Commercial Bank (Techcombank), and Vietnam Prosperity Bank (VPBank). Several banks recorded increased profits, such as BIDV, VietinBank, Vietcombank, and MB... but the profit growth was not very high compared to the same period last year, or even remained flat.
According to SSI's assessment, bank profits continued to grow but slowed down significantly. The after-tax profits of 11 out of 27 listed commercial banks maintained year-on-year growth at 3.5%, but this was significantly lower than the 11.6% increase in Q1 2023.
"Feeling the pinch" due to economic difficulties.
According to experts, the main reasons why bank profits were no longer "huge" in the second quarter of 2023 were the shrinking net interest margin (NIM), low credit growth, and a sharp increase in provisions for credit risk.
The leader of a commercial bank whose profits decreased in the first six months of 2023 stated that the bank's profits were "eroded" not only due to reduced interest income caused by low credit in the first half of 2023, but also because, in the context of a difficult market, the bank's bad debts increased, forcing it to increase provisions for risk. All of this has "eaten into" the bank's profits. "Another reason for the slowdown stems from the difficulties 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 added.
In a recently published report, analysts from Vietcombank Securities (VCBS) predict that pre-tax profits for the entire banking sector this year are expected to reach only about 10%, a sharp decrease compared to last year. Factors affecting the overall business results, besides the low credit growth this year, include a decline in non-interest income across most key activities compared to the same period last year. In particular, income from cross-selling insurance (bancassurance), which accounts for approximately 30% of banks' service income, has been impacted by increased inspections of insurance sales by regulatory agencies and a decrease in people's incomes.
VCBS experts assess that bank profits are expected to continue to be highly differentiated, with some smaller banks continuing to slow down, or even experience negative growth, if the real estate market and global situation worsen, leading to slower credit growth and difficulties in recovering customers' ability to repay debts.
However, some commercial banks still have good business results, mainly due to increased lending and reduced provisions for bad debts resulting from good bad debt control.
Specifically, as of June 30th, Sacombank's pre-tax profit reached VND 4,755 billion, a 63.5% increase compared to the same period last year. This increase is partly due to Sacombank's active implementation of preferential loan packages, resulting in a credit balance of over VND 460,000 billion, a nearly 5% increase. Simultaneously, operating costs also decreased, particularly through effective handling and control of non-performing loans. Vietnam Maritime Commercial Bank (MSB) recorded a cumulative pre-tax consolidated profit of VND 3,548 billion in the first six months of 2023, equivalent to 56% of the annual plan. Strong credit growth contributed to a 23.2% increase in MSB's net revenue in the first six months of the year.
These are positive signs, but overall, the fact that many banks are struggling despite having "plenty of cash," as the State Bank of Vietnam recently reported, is worrying. According to many experts, decisively reforming administrative procedures and supporting businesses in investment and production is a fundamental solution that will not only help banks operate well (paying more taxes to the State) but also help boost the economy through the current difficulties.
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