The profitability of Vietnamese banks has improved significantly, driven by growth in core income and robust macroeconomic conditions.

Assets of State-owned banks, including Vietcombank, accounted for 44 per cent of the banks’ total assets. (Photo: VCB)

A report from the State Bank of Vietnam (SBV) released this week showed the return on assets (ROA) ratio of the domestic banking system surged to 0.7 percent by the end of November last year from 0.57 percent at the end of the previous year while the return on equity (ROE) ratio also increased by 1.42 percentage points to 9 percent.

Finance and finance leasing companies had the highest ROA ratio in the system, with 3.02 percent. However, the rate decreased compared to the 3.57 percent level recorded at the end of 2017. The companies also topped in ROE with 13.83 percent.

The group of policy banks ranked second with the ROA ratio of 1.02 percent while cooperative banks had the lowest ROA at 0.42 percent.

The ROA ratios of State-owned and joint stock commercial banks were low at only 0.52 percent and 0.76 percent, respectively, much lower than the average rate of the entire industry. 

However, industry insiders said the big gap in the ROA ratios of commercial banks and financial companies was predictable as financial companies often hah higher profit margins than state owned banks’ while their asset size was much smaller.

The SBV report also showed total assets of credit institutions and foreign banks’ branches in Vietnam by the end of last November surged by 8.23 percent against the beginning of the year to 10.8 quadrillion VND (463.5 billion USD).

Of the total assets, State-owned banks, including Agribank, Vietcombank, VietinBank, BIDV, GPBank, CBBank and OceanBank, made up 4.8 quadrillion VND, increasing by 5.18 percent and accounting for 44 percent of the banks’ total assets. 

The figure for joint stock commercial banks was 4.19 quadrillion VND, up 9.07 percent, while it was 154.89 trillion VND for finance and finance leasing companies, up 9.15 percent.

Notably, last year saw the assets of joint venture banks and wholly foreign-owned banks surge sharply by 18.34 percent to 1.1 quadrillion VND.

Besides the assets increase, equity capital of credit institutions and foreign banks’ branches in Vietnam also rose by 10.02 percent to 785.66 trillion VND.

With regards to the capital adequacy ratio (CAR), all credit institutions mentioned above have CAR at above the 9 percent limit, of which the ratio at State-owned banks was 9.33 percent and joint stock commercial banks was 11.13 percent. 

The short-term capital for mid- and long-term lending ratio at State-owned and joint stock commercial banks was reported at 31.43 percent and 33.77 percent, respectively, which helped the banks meet a central bank requirement to lower the rate to below 40 percent from 2019.-VNS