Banks report high Q1 profits

Vietcombank earned a before-tax profit of more than VND8.6 trillion in the first quarter of 2021, becoming the biggest bank in terms of before-tax profit value during that period

High profits

A series of banks have just announced their financial statements for the first quarter of 2021 with profits even higher than before the pandemic. The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) became the biggest name in this regard, reaching a before-tax profit of more than VND8.6 trillion (up 65 and 47 percent from the same period of 2020 and 2019, respectively), followed by the Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) with a before-tax profit of VND8.06 trillion (up 171 and 160 percent from the same period of 2020 and 2019, respectively).

Private joint stock commercial banks also recorded a high profit in the first quarter of this year, double that in the same period last year. The Vietnam Technological and Commercial Joint Stock Bank (Techcombank) earned a profit of VND5.5 trillion, while the Military Commercial Joint Stock Bank (MB) earned VND4.6 trillion, Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) earned more than VND4 trillion, and Vietnam International Commercial Joint Stock Bank (VIB) achieved a profit of VND1.8 trillion. Some other small banks experienced a profit growth of 40-70 percent. The Vietnam Maritime Joint Stock Commercial Bank (MSB) saw its first-quarter-of-2021 profit quadruple compared to the same period last year.

In the first quarter of 2021, 19 of 27 banks announced their business results (accounting for 60 percent of the industry’s capitalization) with after-tax profits increasing 86.7 percent compared to the same period last year, although the total operating income growth was only 30.2 percent.

Khong Phan Duc, Board of Members Chair of Vietinbank’s Fund Management Joint Stock Company, said the banking or finance industry in general usually benefits the greatest in the early phase of a recovery cycle. In the first quarter of 2021, credit grew 3.34 percent, explaining the stronger recovery of the banking sector compared to other sectors, Duc said.

Nguyen Binh Thanh Giao, Director of the ACB Securities Company (ACBS), said the banking industry has always been the mainstay of the economy and an optimistic economic outlook is reflected in the banking sector, she said.

Profit growth continues

Giao forecast annual credit growth of 13-14 percent in 2021-2022 buoyed by expectations of an end to the pandemic and economic recovery. However, revenue from fees in most banks, except Techcombank, BIDV and VIB, are low. Experts forecast profit growth in the remaining months of 2021 but not as high as the rate recorded in the first quarter of this year.

The banking sector’s average growth rate in the first quarter of this year skyrocketed an estimated 50-55 percent. SSI Securities Corporation forecasts that the before-tax profit of the banking sector in 2021 will increase about 24 percent over 2020 thanks to a 15 percent credit growth in 2021 and a decrease in credit costs.

The MB Securities Joint Stock Company (MBS) believes banks will continue to overcome reverses until the economy fully recovers.

According to Tran Thi Khanh Hien, head of research at the brokerage house VNDirect, bank profit growth stems from various factors. These include the low input interest rate reduced three times in 2020 by the State Bank of Vietnam, the authority’s permission for debt restructuring in the context of Covid-19 that eased pressure on bank reserve funds, and banks’ increasing investment in technology and digitalization that reduced their rate of operating costs per total income from 51 percent in 2019 to 48.5 percent in 2020.

“We believe that the banks’ strong profit growth trend will continue, at least in 2021,” Hien said.