Most banks earned high profits, some of them up to 80 per cent higher, in the first nine months of the year, despite drastic measures by the State Bank of Viet Nam to curb the sector's credit growth.

The Viet Nam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), for example, earned about VND1.39 trillion (US$66.7 million) in the third quarter of the year.

For the last nine-month period, its net profit after tax climbed to VND4.12 trillion ($197.88 million), a year-on-year increase of 49 per cent.

Net profits of the Joint Stock Commercial Bank for Foreign Trade's (Vietcombank) were VND1.025 trillion in the third quarter and VND3.30 trillion for the first nine months of the year.

Although it is not a top-tier bank, the Viet Nam Export-Import Joint Stock Commercial Bank (Eximbank) also generated VND759 billion in net profits for the first nine months of the year.

Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) had a net profit of VND1.59 trillion; Viet Nam Technological and Commercial Joint Stock Bank (Techcombank), VND1.69 trillion; and Asia Joint Stock Commercial Bank (ACB), VND2.1 trillion.

Significantly, most of these banks have achieved very high net incomes.

Vietcombank's net income in the third quarter was VND3.60 trillion, doubling the figure of the same period last year (VND1.77 trillion).

During this period, Vietinbank also earned VND5.27 trillion in net income, while Eximbank's net income stood at VND1.44 trillion, registering a year-on-year increase of 80 per cent.

ACB's net income was VND1.66 trillion, up 42.4 per cent, and Sacombank's net income, VND1.5 trillion, or up 63 per cent.

Vietcombank general director Nguyen Phuoc Thanh said banks' net incomes were generated from residential lending, inter-bank lending, the bond market and deposits.

However, a majority of their net income came from inter-bank lending and deposit activities.

Net income from residential and corporate lending activities made a modest contribution because the banking sector's credit growth has been constrained at a low level.

An official of the banking sector, who did not want to be named, said that interest rates in the interbank market stood at a very high level during September.

This created conditions for banks with strong capital potential to make profits.

Explaining the high profits, independent market watchdogs said that although deposit interest rates were cut and strictly controlled by the SBV at the level of 14 per cent per year lending interest rates declined very slowly. The latter rates stood at a high level (about 19 per cent).

Experts from the central bank said that the Government should create regulations that would control lending and deposit interest rates to ensure that a reasonable gap exists between these two kinds of interest rates.

Banks typically make profits when the gap between lending and deposit interest rates is about 3 per cent. However, the current difference is much higher than that.

Senior financial expert Dinh The Hien said that the net income of banks over the last few months was high while their credit growth was low, at only 10 per cent, and earnings from other banking services were also very modest.

The high level of banks'net income was due largely to the major differences between lending interest rates and cost of capital.

Because of the high lending rates, individual and business borrowers have had to pay more, placing them under even more pressure and creating a high risk of bad debts, according to Hien.

VNS