VietNamNet Bridge – While banks outdid each other in revealing their 2014 profit figures, they seem rather reserved in their 2015 profit outlook, Vneconomy newswire revealed.

Bright profits in 2014

State-owned Vietcombank reported a VND5.68 trillion ($265.42 million) annual turnover with bold credit growth and other banking activities for the 2014 financial year. Its credit growth was recorded at 17.68 per cent and bad debts was at 2.29 per cent.

BIDV also revealed its VND6.065 trillion ($283.41 million) profit, an increase of 20 per cent from last year. BIDV’s credit growth was recorded at 18.9 per cent and return on equity (ROE) reached an astounding 14.4 per cent.

Likewise, Agribank closed its 2014 books with the pre-tax profit reported at VND3.238 trillion ($151.31 million), an increase of 6 per cent compared to 2013 while Vietinbank attained VND7.3 trillion ($345.97 million) revenue and its bad debts fell to a meagre 1.1 per cent.

Meanwhile, joint-stock banks also celebrated a similarly successful financial year. MBBank’s pre-tax profit reached over VND3 trillion ($140.19 million) and managed to drive its bad debts under 2.73 per cent. TPBank’s reported earnings stood at VND536 billion ($25.05 million) with a single 1 per cent bad debts.

Although smaller banks have not released their profit figures as of yet, according to National Financial Supervisory Commission chairman Vu Viet Ngoan, these banks’ 2014 profit figures were also promising: their deposits, bad debts and loans figures all moved in favourable directions.

In general, 2014 proved to be a continuation of brighter years since 2011 and may thought banks could be heading towards 2015 with optimism.

Light treading

Howerver, despite the profitable results in 2014, banks seem to be cautious in their ambitions for 2015 as profits may not provide the clearest view of the big picture, according to a number of banks.

Although Vietcombank estimated VND6 trillion ($280.37 million) in the pre-tax profit for 2015, the bank leader shared that they would continue to prioritise monitoring their two-year initiative to engage with risky businesses and provision for bad debts. By the end of 2014, Vietcombank’s total provision for bad debts is said to be enough to cover their entire volume held.

In 2015, Vietcombank could achieve a higher profit figure if it would ease on the provision for bad debts. The bank stressed that its 2014 pre-tax and pre-provision-for-bad-debts profit reached VND10.233 trillion ($478.18 million), increasing 12.5 per cent compared to last year. However, after making provisions for bad debts, the figure was cut down to nearly half.

For banks, on the other hand, profit figures might bear secondary importance compared to their handling of bad debts. In this context Vietcombank’s targeting to recover around VND2 trillion ($93.46 million) of bad debts this fiscal year provides information as to their performance and priorities.

Meanwhile, VIB also stressed its sacrificed profits given up for risk provisions in recent years. Like Vietcombank, VIB prioritises its provisions for bad debts and shows a tendency to avoid too many dividend payments.

Banking experts pointed out that provision for bad debts would be the biggest drawback on banks’ earnings figures. The amount of provisions set aside for bad debts directly determines the profit figure. However, they noted that the nature of these provisions was to make allowances for the future, thus any of the unused amounts of provision would be added back to the profit figure later on.

Banks’ hastened efforts in setting up and managing provisions for bad debts in recent years will become promising benefits in the future. Once bad debts are dealt with effectively, banks’ profit will not be held back. This was true in the case of Vietcombank when in 2014 the bank successfully recovered VND1.9 trillion ($88.79 million) of bad debts.

VIR