Banks announce high profit for first half

Commercial banks have all announced satisfactory business results for the first six months of the year, which saw a profit level much higher than that of the previous year. However, the high profit has not prevented bank share prices from falling.

Asia Commercial Bank (ACB) announced its pre-tax profit of VND880bil ($55mil) for the first half of the year, while the figure was approximately VND700bil ($43.75mil) for 2006 as a whole. The pre-tax profit of ACB gained in the six months fulfilled 59% of its yearly plan, while the total outstanding loans up to now has fulfilled 88.4% of the plan.

Sacombank has also announced satisfactory business results. The bank now has the total assets of VND38,400bil, an increase of 55% over the beginning of the year. The pre-tax profit of the bank reached VND610bil ($38.12mil), while the profit for 2006 was VND543.2bil ($33.95mil).

An official from the State Bank of Vietnam said that commercial banks had tried to push up credit services. Some banks have attained the high credit growth rate of more than 50%, much higher than the average growth rate of 33%. This was the main reason for the high profit.

However, the official said that the heavy focus on credit services of several newly set up banks, which do not have much experience and a good risk control system, would mean high risks. Some other banks have been found as focusing on loaning for securities investments (outstanding loans for securities investments accounted for more than 50% of total outstanding loans), which, in the eyes of the central bank, is a bad thing.

In fact, these banks are aware of the risks, but they are under pressure to get more profit, while funding securities investment proves to be the main channel that can help bring fat profit in the context of the hot market.

Analysts said that banks would face big difficulties in the time to come. The fact that the central bank has tightened monetary policies in order to curb inflation will make the expenses of banking operations higher. Moreover, the profit of banks will decline when banks are not allowed to provide many loans to securities investors, and when the market falls down.

Despite the good business performance of banks, experts said that this would not help ‘rescue’ bank share prices.

In fact, banking is still considered a business field that can bring super profit. Therefore, bank shares have always been very attractive in the eyes of investors.

However, bank share prices, according to experts, will not bounce back at this moment as bank shares are in a part of the market in a gloomy period.

Bank shares all now seem to be frozen. The prices of these shares have decreased by 50% compared to those at the end of 2006 or early 2007. The shares of Phuong Nam Bank, for example, are now selling at VND36,000/share on the OTC market, while they once were sold at VND90,000/share. At the Hanoi Securities Trading Centre, ACB shares saw the price decrease of 25.7% from early June, now staying at VND120,000/share.

Source: VNE