VietNamNet Bridge – Small banks had a “bountiful crop” in 2013 while big banks experienced lower profits.

VietinBank, for example, has reported unsatisfactory business results for 2013. The bank with the biggest equity in Vietnam (over VND51 trillion) earned a pretax profit of VND7.75 trillion.

This figure is considered “modest”, especially in light of its low non-performing loan (NPL) ratio of 0.8 percent. In other words, the bank did not have to make high provisions against risks.

Vietcombank reported a pretax profit of VND5.727 trillion in 2013 after making a strong push at the end of the year. Its outstanding loans did not grow in the first six months.

A representative of Eximbank, another big wholesale bank, revealed that the bank’s profits in 2013 were equal to only 50 percent of the target.

Meanwhile, other banks have reported fat profits thanks to increased revenue from retail banking services.  

Sacombank, for example, gained pretax profit of VND2.8 trillion and credit growth of 13.6 percent.

Sacombank’s CEO Phan Huy Khang said 40 percent of the profit came from individual customers.

Overseas remittance services also brought high profits, with $1.7 billion worth of overseas remittances going through the bank in 2013.

“Our retail banking services saw the highest growth rate in 2013. We lent to workers, business households and farmers. Developing retail banking will also be our goal in 2014,” Khang said.

VP Bank has not released its 2013 financial report, but small clients are believed to have made great contributions to the bank’s earnings.

In order to push up retail banking services, VP Bank unexpectedly employed 1,500 workers and caused a big surprise when reporting a high 28 percent credit growth rate in the first nine months of 2013.

Tien Phong, a small bank, attained an impressive credit growth rate of 93 per cent and VND360 billion in profit (15 percent higher than the targeted level) and helped Kien Long Bank, the major lender in Mekong River Delta, gaina profit of VND400 billion.

High risks for banks

Dr. Tran Du Lich, a member of the National Advisory Council for Finance and Monetary Policies, warned that high risks continue to exist in consumer lending for both banks and borrowers.

Bankers, in order to attract more borrowers, have to cut lending interest rates, which means that they have to accept lower margins between the deposit and lending interest rates.

Meanwhile, they face higher risks and have to pay higher management costs due to an increasing numbers of clients.

Lich also warned that if all banks rush to become retailers, this will cause big changes to the banking personnel market.

A report of Towers Watson revealed that 15 percent of banking officers left their jobs in 2013.

Nguyen Thi An Binh, deputy CEO of Military Bank, while admitting that retail banking can bring high profits, said that her bank did not intend to join the race for consumer lending.

Binh said that retail bankers would have to spend a lot of money on labour and client management costs, and face high bad-debt ratios as well.

Compiled by C. V