Banks consecutively announce profit

Transactions in Vietinbank Bank Photo: Ha Phuong

Impressive figures

Summarizing 2016, Vietcombank said that until December 31, 2016, its capital mobilization reached 598,867 billion vnd, increasing by 19.4% compared to 2015. The credit outstanding balance reached 469.8 billion vnd, up by 19% compared to the end of 2015. In 2016, the Bank achieved the pretax-profit before reserves of 14,605 billion vnd, up by 15% compared to the same period last year; risk provisions was extracted 6,392 billion vnd. Profit before tax reached 8,212 billion vnd, up 23.4% compared to the same period in 2015. In particular, in 2016, Vietcombank was the pioneer collecting debts from VAMC, officially put bad debts on one book. Until December 31, 2016, Vietcombank’s bad debt in balance sheet was 6,787 billion vnd, reducing 309 billion vnd compared to 2015 (down by 4.4%); bad debt ratio was at 1.44% level (down 0.4% compared to the end of 2015).

At BIDV, to the end of 2016, capital mobilization reached nearly 939.000 vnd, up 20% of the total credit outstanding balance and the investment capital reached over 935,000 billion vnd, up by 18% compared to 2015. The bank’s pre-tax profit was estimated at 7,507 billion vnd, up 7% compared to 2015. The bad debt ratio was controlled by BIDV at 1.47% of total outstanding balance. In particular, in 2016, BIDV contributed 4,627 billion vnd to the State budget and was one of the top banks paying to the budget of the country.

At the conference summarizing the business operation in 2016 and deployment of tasks in 2017 was held by VietinBank, the General Director of Vietinbank Le Duc Tho said, in 2016, VietinBank’s profits reached 8,250 billion vnd, up by 12% compared to 7,360 billion vnd in 2015. Until December 31, 2016, the total capital mobilization of VietinBank was estimated at 862,000 billion vnd, up by 21% compared to 2015. The credit outstanding balance also positively grew, reaching 720,000 billion vnd, up by 18% compared to 2015. With the drastic and unified solutions to control debt and promote to handle the bad debt, in the end of 2016, VietinBank continue to maintain top quality of assets with the ratio below 1%. Mr. Tho said, VietinBank has drasticly, positively, closely and absolutely handled and withdrawn bad debts and debts sold to VAMC, thereby accelerating business refinancing.

Meanwhile, some private banks also started to announce business results in 2016. Specifically, TPBank said, profit in 2016 reached 707 billion vnd, up nearly 13% compared to 2015. The loan outstanding balance for individuals, enterprises and economic organizations until the end of period relatively grew, reaching 47,000 billion vnd . The bad debt ratio was maintained at 0.51%, better than the plan under 2% set at the beginning of 2016. Similarly, VIB Bank also reported its profit before tax of 702 billion vnd, 7% higher than 2015. Total loan outstanding balance of the bank reached approximately 68,000 billion vnd, up nearly by 25% compared to 2015. The ratio of bad debt continues to be controlled under 3%.

The pressure of capital increase

It is expected that on September 1, 2017, Basel II will be applied in 10 pilot banks, including BIDV, VietinBank, Vietcombank, Techcombank, ACB, VPBank, MBBank, Maritime Bank and VIB. Hence, the demand to raise capital to ensure capital adequacy ratio (CAR) at the minimum level of 8% under Basel II is very urgent. A recent analysis of the VCBS Securities Company pointed out that, in the 10 banks participating in the pilot, the Commercial Joint Stock Bank group is likely to better meet the demand due to having CAR at a significantly high level compared to the level as prescribed, such as ACB, VIB, Techcombank.

Meanwhile, the State Commercial Joint Stock Bank group will be pressed of the high capital increase (Vietcombank, BIDV, VietinBank). In which, the VietcomBank has many more remaining balances due to the ability to mobilize capital from various sources. BIDV and VietinBank have CAR nearly at the regulated threshold (9%) at the same time being under pressure to reduce CAR when paying share dividends as the proposal of the Ministry of Finance. Notably, VietinBank approached the ownership ceiling to mobilize foreign capital, while the Bank no longer has remaining balances to increase Tier 2 capital.

Currently, almost all banks still apply short-term measures to increase capital by issuing bonds. However, according to analysis by VCBS, this measure will only help banks to solve the situation in 1 to 2 years. While, the capital expense in issuing banks is under high pressure due to the bond's interests is 1-2% higher than the normal mobilization interest.

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The report of VCBS also emphasized that the pilot of Basel II will be the key task of the banking sector in 2017. To ensure the CAR as stipulated, banks may restrict credit and promote capital, from that, to put pressure on the cost of capital. According to calculations by VCBS Securities Company, to increase 1% of the Capital Adequacy Ratio (CAR), the banks need to mobilize an additional 10-15 % self-financing. Accordingly, the pressure to raise capital in 2017 is great. While, the support measures have not been provided by management authorities, the capital mobilization by bond and credit restrictions will be the main measures which are applied in 2017. Hence, one side of capital expense increases in the whole system, on the other side, the credit restriction negatively impacts on the whole sector’s growth.