Huge profits from securities trading and retail banking

It has been asked why joint stock banks earned such fat profit in the first quarter of 2007 when it has been very hard to mobilise capital.

One year ago, when joint stock banks all set the target of multi-fold increases in gross profit for 2007, they were described as ‘too ambitious’. However, the smooth operation of the banks in the first quarter has shown that the targets are within reach.

By March 31, 2007, the total assets of ACB had reached VND50,326 billion (US$3,145.37 million), double the same period last year. The bank reported the pre-tax profit of VND18,246 billion (US$1,140.37 million), nearly a 3.5-fold increase.

The profit Asia Commercial Bank (ACB) gained in the first three months of the year accounted for 25.5% of its 2007 plan – VND1,500 billion (US$93.75 million).

Meanwhile, Sacombank reported the accumulative pre-tax profit of more than VND302 billion (US$18.87 million), an increase of 188% over the same period last year.

Eximbank has also reported encouraging business performances in the first quarter of the year with the pre-tax profit of VND177 billion (US$11.06 million), or 2.6-fold higher than the same period last year. The bank’s bad debt ratio stayed at a very low level, 0.85%, much lower than the safety line at 2% given by the central bank.

In 2007, the bank plans to have the total assets of more than VND31 trillion (US$1.93 billion), chartered capital of VND2,800 billion (US$175 million) and pre-tax profit at more than VND600 billion (US$37.5 million).

Besides the three top profit-making banks, Techcombank, VP Bank, VIB Bank, and Military Bank have also been named as big profitable banks.

VP Bank reported the first quarter profit of VND72 billion (US$4.5 million), double that of the same period last year. Though the bank’s shareholders’ meeting approved a plan to get the profit of VND350 billion (US$21.87 million), the director board still thinks that the VND400 billion (US$25 million) goal is completely feasible.

By the end of March 2007, VIB Bank’s total assets had reportedly reached VND18 trillion (US$1.12 billion), increasing by 104%, and pre-tax profit reached VND64 billion (US$4 million), increasing by 70%.

Techcombank has not declared its business results for the first quarter of 2007, but the two-month business performance was very satisfactory. The bank had the total assets of VND20 trillion (US$1.25 billion) by the end of February, and the accumulative profit of VND46.5 billion (US$2.90 million).

Analysts said that the turnover from securities trading could make a big contribution to the bank’s satisfactory business performance.

Dragon Capital, in its recent analysis about ACB, said that in 2006, the non-banking operations of the bank, mostly from its securities company (which is the third-biggest securities company in Vietnam), made only a modest contribution to the total profit of the bank. However, the contribution of securities trading activities is expected to be very considerable in the future.
The marketing director of a joint stock bank also said that the operation of the securities company, to which the bank makes capital contributions, proves to be very encouraging, and can bring high profit. However, the director has declined to discuss the turnover from the bank’s securities company, reasoning that the profit from the company was not counted towards the bank’s general profit.

Meanwhile, Le Dac Son, Director General of VP Bank, said that the bank’s profit had come from traditional services (lending, banking retail), as VP Bank’s securities company has just been operating for three months.

When asked about the prospectus in the coming months, leaders of all joint stock banks prove to be very optimistic. They said that the first quarter is always the most difficult period in a year, as it is always difficult to mobilise capital after the traditional Tet. However, the business results proved to be encouraging in the first quarter, and ‘well begun is half done’.