VietNamNet Bridge – The report which has been released by the State Bank of Vietnam, shows that the ROE (return on equity) index of the banking system stays at the average level if compared with the ROEs of the other 20 sectors, ranking 11 out of 21, while the ROA (return on assets) is the lowest.

The report has been released after commercial banks reported the high profits for the first half of 2011, which then raised the wave of indignation from the business community. Vietnamese businessmen voiced their dissatisfaction that banks still could earn fat profits by setting high lending interest rates, while production businesses had to struggle to survive the difficulties.

When realizing the report with the analysis about the banks’ profit, the central bank called on the public to keep an unbiased outlook to the profits obtained by commercial banks in the first six months of the year.

The central bank’s inspectors have pointed out some noteworthy characteristics in the banks’ operation and business result.

Firstly, by June 30, 2011, the margin between the revenue and the expenses (not the profit), of the whole banking system had increased by 42 percent in comparison with the same period of 2010. However, the business performance proved to be quite different at different banks. 13.6 percent of credit institutions have been found as operating ineffectively due to many reasons and had the minus margins between the revenue and expenses.

The high income growth rate in the first six months of the years of Vietnamese credit institutions has been blamed on many factors.

The central bank’s inspectors have pointed out that the ratios of income growth rate on stockholder equity and on asset growth rates were reasonable, if considering the relation between the income and the assets, and between the income and the stockholder equity.

The total asset and total stockholder equity growth rates were 39 and 44 percent, respectively, in comparison with the same period of the last year, while the income growth rate was 42 percent.

In a deeper analysis, they said that though the banks’ income in the first six months of the year was higher than that of the same period of 2010, the ROA and ROE indexes were low with ROA at 0.77 percent and ROE 8.1 percent.

The indexes were nearly the same with that in the same period of 2010 (0.75 percent and 8.2 percent, respectively), but lower than the yearly indexes of the previous years (ROA were 1.0 and 0.9 percent in 2009 and 2010, while ROE were 10.4 and 10.3 percent).

If comparing the two indexes of the banking system with that of the other 21 sectors in the national economy, one would see that the ROE of the banking system just stays at the average level (11out of 21), while the ROA was the lowest.

That explains why the total income of credit institutions increased significantly, but bank shares are not attractive to securities investors.

Meanwhile, the average ROE index of the banks South East Asia is 14-15 percent, while the index in the world is around 17 percent.

The credit institutions which had minus profits in the first six months of the year were mainly the ones which had small total assets and stockholder equity, and did not have flexible corporate governance policy.

Secondly, the margin between the income and the expenses of commercial banks by June 30 still cannot absolutely truly reflect all expenditure items of the banks. This has been attributed to the technical regulations on the issue.

Besides, the central bank has also reminded people that the released figures have not been audited by independent auditing firms.

Source: TBKTVN