Credit institutions gained an accumulated profit of VND29.5 trillion (US$1.34 billion) during the first 11 months of this year, up 3.2 per cent from the same period last year.

According to the State Bank of Viet Nam (SBV)'s chief inspector Nguyen Huu Nghia, the profit is equal to only 53-64 per cent, compared to profits in 2010 and 2011.

Nghia attributed the result to the sharply dropping interest rate and increasing costs of basic goods. Additionally, as much as 17 per cent of credit institutions incurred losses during the period, he said, adding that among the profitable institutions, more than half had falling profit levels, compared to last year.

Nghia said he was concerned that if the business performance did not improve, part of the credit institutions would be placed under enormous financial pressures and might not be able to handle large amounts of bad debts, forcing them to sell their debts to the Viet Nam Asset Management Company.

Credit institutions, especially small-sized ones, also said that it was difficult to meet their profit targets this year, attributing it to low credit growth due to economic difficulties.

Meanwhile, Mekong Bank general director Tay Hang Chong told tinnhanhchungkhoan.vn that his bank's business performance in 2013 was relatively good, however, it was difficult for the bank to meet its VND300 billion ($14.28 million) annual pre-tax profit target.

According to Chong, it was difficult, not only for Mekong Bank but also for other banks, to meet the profit targets this year.

Echoing Chong, Ocean Bank deputy general director Nguyen Van Hoan said that profits from the banking industry this year could not be as high as expected, since the industry was still facing many difficulties.

Hoan said that besides economic hardships, profits from the credit activity of the banking industry were lower than previous years because lending rates have been significantly cut. Currently, to boost lending, gaps between deposits and lending interest rates in many banks were roughly 1.5 per cent yearly for enterprises and 2-2.5 per cent for individuals.

Further, NamA Bank deputy general director Tran Ngoc Tam said that credit institutions were also cautious to boost lending, as they were concerned about rising bad debts. Tam said the bank had to set aside more than VND66 billion ($3.14 million) for provisions, though its bad debt was still maintained at less than 3 per cent.

This year, however, many banks said they have gained profits thanks to the stable forex rate policy.

Sai Gon Thuong Tin Commercial Joint Stock Bank's general director Phan Huy Khang said foreign exchange was one of the "bright" segments that are supporting banks' profits in the context of a strong fall of income from credit activities.

As per the financial reports from 13 commercial joint stock banks, in the third quarter of 2013, their income from foreign currency and gold trading activities reached more than VND670 billion ($30.45 million), a significant rise in comparison with the loss of VND704 billion ($32 million) in the same period last year.

Source: VNS