VietNamNet Bridge – Non-credit services have never been the main source of income of banks, even when the lending gets stuck now.


Commercial banks have been struggling hard to push up lending. They keep pessimistic about the slow credit growth, the high provisions against risks and the low margin profits (the gap between the lending and deposit interest rates).

Businesses, the biggest borrowers, who are experiencing the most difficult days over the last 20 years of doi moi (renovation), dare not borrow money at this moment because of the big inventories, even though the lending interest rates have decreased significantly.

According to Chair of the Vietnam Chamber of Commerce and Industry (VCCI), more than 40,000 businesses left the market just in the first nine months of the year, while only 10,000 businesses resumed their operation later.

The situation of operational enterprises is bad. Loc cited a report by the Ministry of Finance as saying that 66 percent of businesses don’t have to pay the corporate income tax.

“This means that 66 percent of enterprises are unprofitable,” Loc said.

Since the lending has got stuck, banks’ profits have reportedly decreased dramatically. A report by the HCM City branch of the State Bank of Vietnam showed that 7 out of the 14 HCM City-based banks reported the gross profits by the end of July 2013, lower than 50 percent of their profits in the whole year 2012.

When asked about the expected profits in 2013, a banker said his bank may not fulfill the business plan.

In theory, when the income from lending decreases, banks would try to seek profits from other sources, including banking services.

Tien Phong Bank has provided the service which allows to trade gold via Internet. The Military Bank has launched MB.Plus and the mobile version of eMB. VIB has introduced the website where customers can find useful information about the procedures on borrowing money.

The great efforts by commercial banks to provide more services and offer preferences to attract customers has led to the higher proportion of the turnover from service in comparison with the banks’ total turnover.

However, though the proportion has increased, the business remains unsatisfactory, because the turnover is not big enough to offset the income decreases and the investment capital.

Only the Bank for Investment and Development of Vietnam (BIDV) has reported a satisfactory business result with the net turnover from services reaching VND1.2 trillion in the first half of 2013, a sharp increase from the last year’s same period’s VND411 billion.

A report by Ernst & Young, an auditing firm, showed that all the five polled banks said they can see the importance of the increasing the popularity and the use of banking services. However, they still do not pay appropriate attention to develop the services.

The Deputy General Director of a big bank frankly said banking services don’t bring considerable income. In order to develop services, banks have to spend more money on the labor force and material facilities, while the number of customers, who have the demand for the uses, and those, who are affordable the services, remains modest.

“Some banks now still dare not charge fees on ATM transactions, a very popular service, let alone other services,” he said.

Chi Mai