2021 was a fruitful year for commercial banks, which saw a 25 percent growth rate.
TP Bank reported total revenue of VND13.5 trillion in 2021, an increase of 30 percent over the year before. The bank not only made profits from lending but also from services, with net profit increasing by 65 percent. Its pre-tax profit was VND6.038 trillion in 2021.
Vietnam Bank for Agriculture and Rural Development (Agribank) has reported profit of VND14 trillion in 2021, while VietinBank VND16.8 trillion.
Maritime Bank (MSB) had made a pre-tax profit of VND4.6 trillion as of the end of October 2021, or 40 percent higher than the targeted level for the year. The bank estimates pre-profit of over VND5 trillion in 2021, far higher than the target of VND4.1 trillion.
Other commercial banks also fulfilled their yearly business plans just after the first nine months of the year. VietBank made a profit of VND400 billion, higher than the VND390 billion target, SeA Bank VND2.53 trillion (VND2.414 trillion). Meanwhile, VietCapital Bank just needed six months to fulfill the yearly business plan: it had made a profit of VND337 billion in H1, higher than the planned VND290 billion.
According to BIDV Securities, the revenue of the entire banking system in 2021 was VND406.694 trillion, up by 16.7 percent, while the profit was VDN163.846 trillion, up by 24.2 percent.
Analysts said banks can make profits because the capital cost has decreased more sharply than the lending interest rates in the first nine months of the year, which helped widen the NIM (net interest margin).
The State Bank of Vietnam (SBV) in 2021 often cut regulating interest rates, paving the way for banks to slash deposit interest rates. This allowed banks to mobilize capital at lower costs. Meanwhile, banks still maintained high lending interest rates.
Since banks have been going digital and non-cash payment has become popular, banks can attract a large number of CASA (current account savings account) which have very low interest rates, thus helping to reduce capital costs.
The income from service fees, especially the sale of insurance policies, also helped banks make fat profits. Banks controlled their operation costs well, especially banks with rapid digital transformation.
In the four quarter of 2021, the national economy and the demand for capital increased, which led to a sharp increase in credit demand. Banks still could mobilize capital at low costs. Therefore, the profits of most banks rose sharply in the quarter.
As of the end of the third quarter, six commercial banks had reported pre-tax profits of over VND10 trillion, namely Vietcombank (VND19.311 trillion), Techcombank (VND17.098 trillion), VietinBank (VND13.911 trillion), Military Bank (VND11.885 trillion), VP Bank (VND11.736 trillion) and BIDV (VND10.733 trillion).
|As per the central bank’s request, 16 commercial banks, which provide 75 percent of total outstanding loans, committed to slash interest rates to support people and businesses hit hard by Covid-19 from July 15, 2021 to the end of the year with the total amount of VND20.613 trillion.|
These banks are expected to continue to have impressive business results in Q4. Vietcombank and Techcombank are expected to see profit exceed VND20 trillion.
Meanwhile, some other banks have predicted profit decreases. Eximbank, for example, has lowered the targets for pre-tax profit by 60 percent, from VND2.15 trillion to VND1.3 trillion. The figure is even lower than the VND1.34 trillion it reported for 2020.
Meanwhile, VIB Bank reported that it may not fulfill the yearly business plan.
Can Van Luc, Chief Economist of the Bank for Investment and Development of Vietnam (BIDV), said the banking sector performed well in 2021 with an estimated growth rate of 25 percent. The profits of the banking system over the last two years have been growing well, while regulations set by the central banks, allowing rescheduling of debt repayment and debt groups unchanged, helped banks gain high profits.
According to an official of SBV, with the average capital mobilization interest rates of 5-5.5 percent per annum, the lending interest rates of 7.5-8 percent would be reasonable.
However, businesses said that they cannot borrow money at the 7.5-8 percent interest rates. The interest rates are applied in the first three months and higher in the next months.
Businesses said the average interest rate of 6-month loans they have to pay is 9 percent per annum in the first three months and 11 percent in the next three months, which means the average interest rate of 10 percent. The lending interest rate is overly high, if noting that banks only pay 6 percent per annum or lower for six-month deposits.
Many banks said they have eased lending interest rates in response to the call from SBV. However, businesses argued that the interest rate cuts were moderate.
As per the central bank’s request, 16 commercial banks, which provide 75 percent of total outstanding loans, committed to slash interest rates to support people and businesses hit hard by Covid-19 from July 15, 2021 to the end of the year with the total amount of VND20.613 trillion.
As of October 31, 2021, the total amount of interest cut by the 16 banks had reached VND15.559 trillion, including VND12.663 trillion of four state-owned banks, while 12 private banks had cut only VND2,869 trillion.
Luc predicted that banks profits in 2022 would be not as good as 2021, because of the impact of the pandemic and new policies. However, the profit of the entire banking system would still grow by 15-20 percent.
Meanwhile, VN Direct Securities said the net interest margin of banks has become narrower as they have been told to ease lending interest rates to support clients. Banks are predicted to obtain a 19 percent growth rate this year.
Many banks made a high profit in 2021 thanks to high lending interest rates. However, they have been warned of ‘making a rod for their own back’.
In October, the average interest rates on bank deposits for six months and 12 months were 4.7 per cent and 5.5 per cent, down half a percentage point from a year earlier, according to Bao Viet Securities Company.