Banks are cheerful for interest

	The bad debt ratio was classified among banks in the first quarter
	State Bank works to maintain stable interest rates
	Banks aim for high profit in 2017
	State Bank: Interest rates remain stable

Profits of banks still dependent mainly on credit

Surge of interest

According to the Military Bank (MBB) 's financial report for the first quarter of 2017, customer deposit mobilisation was down by VND12.4 trillion, accounting for 6.37% from the beginning of 2017, down to VND 182.4 trillion. Mobilisation from the issuance of papers also increased only about 260 billion.

Credit outstanding balance also increased only slightly 0.44% over the beginning of the year. However, MBB's business results still grew in different segments. Particularly, net interest income jumped 36% to VND 2,406 billion.

Net interest from service activities also nearly doubled to VND 232 billion. As a result, profit before tax in the period of MBB reached nearly VND 1,112 billion, up 26% last year. Compared to the plan set out at the annually General meeting of Shareholders in 2017, MBB has completed nearly 25% of the whole year 2017 plan.

Profit after tax of Eximbank in the QI/2017 also improved compared with the same period last year, reached VND 136 billion, 5,6 times the results of the quarter of 2016. Specifically, according to the quarterly financial report I/2017 of the Eximbank, as of 31/3/2017, the credit outstanding balance of Eximbank reached more than VND 86,435 billion, a slight decrease compared to the same period (nearly VND 86,981 billion). Customer deposits achieved more than VND 110 thousand billion, up 8%.

This meant that net interest income of the Bank slumped more than 25% compared to the quarter of 2016 to near VND 690 billion. However, base on services and forex trading which make profit margins increase, along with lower operating cost and risk provision cost, helped banks to increase profits. Specifically, operating cost decreased 20% to VND 531 billion, while the risk provisions cost for credit losses fell by more than 60% to VND 133 billion.

Techcombank's consolidated financial statement for the first quarter of 2017 also specified: the profit before tax reached over VND 1,320 billion, profit after tax was VND 1,060 billion; increasing approximately 130% over the same period last year.

As a result, net interest income in the period reached nearly VND 2,186 billion, up 8% over last year. Net interest from trading securities reached VND 174 billion, while over the same period last year recorded just over VND 8 billion. Net interest from trading securities investment also increased more than 3 times to VND 448 billion.

Similarly, Sacombank's QI/2017 profit before tax also reached over VND 309 billion, up 55% over last year. Profit after tax reached VND 210 billion, up nearly 30%. At International Bank (VIB), business activities also grew at the most portfolios. Net interest income increased 16% over last year, net interest income from services increased by 31% over lats year and income from investment securities increased by 21% over last year. Particularly foreign exchange trading activities decreased due to unfavourable market conditions, as a result, profit after tax of the bank reached VND126 billion, up 14% over last year.

Meanwhile, VPBank is currently ranked number one in terms of profitability among commercial joint stock banks with profit after tax of VND 1,537 billion in the first quarter of 2017, up 77% in the same period last year. According to VPBank's financial statement for the first quarter of 2017, net interest income of the bank reached VND 4,829 billion, up 45% over last year. Net interest income from services increased sharply by 74% to VND 304 billion; The net interest gained from trading securities investment reached VND 75 billion, double the same period; Interest from other activities also increased by over 50% to VND 206 billion. Similarly, many other banks such as ACB, TPBank and LienVietPostBank also reported high growth rate over the same period last year.

Bad debt increases

Along with the growth of profit, at many banks, operating cost, provision cost also increased quite high. The number of bad debts also increased at some banks. Typically, MBB's operating cost in the first quarter of 2017 up to VND 1,210 billion, up 31% compared to Q1/2016. Contingency cost also jumped 142% to VND 579 billion.

Of which, salaries increased by 47% to VND 590 billion, accounting for nearly half of MBB's operating cost. At the end of Q1/2017, MBB's bad debt was VND 2,020 billion, accounting for 1.33% of total outstanding loans. While in early 2017, the bank's bad debt was VND 1.987 trillion, accounting for 1.31% of total outstanding loans. In 2017, MBBank is assigned to maintain the bad debt ratio under 1.5% by General meeting of Shareholders.

Similarly, VPBank's operating cost during the period also increased 40% to VND 1,797 billion; The risk provision cost also increased by 27% to VND 1,684 billion. VPBank's bad debt at the end of March 2017 was VND 5,325 billion, accounting for 3.5% of total outstanding loans.

Compared to the beginning of 2017, bad debt has increased by VND 1,055 billion. ACB's operating cost for the first quarter of 2017 increased 37% to VND 1,473 billion. The cost of provision also increased 2.5 times to VND 607 billion. Total bad debt of the bank up to the end of March was VND 1,907 billion, accounting for 1.08% of total outstanding loans, up from 0.87% at the end of 2016.

At Eximbank, bad debt accounted for approximately 3% of the total at VND 2,589 billion, up from 2.95% at the beginning of the year. Notably, the debt is likely to lose capital up to VND 1.262 billion, up 12%. Techcombank's loss also increased from VND 1,375 billion at the beginning of the year to more than VND 1,500 billion; Bad debt ratio increased from 1.57% to 1.89%.

Economist Bui Quang Tin said that the profit growth of banks in the first quarter of 2017 is based on two reasons. Firstly, interest mobilisation rates decreased in comparison with the same period last year due to the growth of call deposits. Secondly, in the first months of 2017, banks have given some loans such as real estate, securities with higher interest rates.

This helps to increase net profit in the period. In addition, from the beginning of the year, some banks have bought bad debts from VAMC to take the initiative in handling debt. After the process is completed, these banks will be reversed provisioning, increasing profit in the period.

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However, for sustainable profitability, Mr Tin believes that banks should strictly comply with the regulations of the State Bank in Circular 06 on the short-term capital ratio for medium and long-term loans, while increasing the revenues from services to reduce dependence on lending activities, thereby reducing the risk of bad debt.