Strong rise in bank profitability in first quarter

As of the end of March 2021, Asia Commercial Bank (ACB) reached VND450 trillion (US$19.57 billion) of total assets, up 1.1% on-year. Credit reached VND324 trillion (US$14 billion), increasing over 4.1%, while mobilisation reached VND352 trillion (US$15.3 billion). ACB's pre-tax profit in the first quarter reached VND3.1 trillion (US$134.8 million). The non-performing loan (NPL) ratio was controlled below 1%.

This year, ACB's pre-tax profit target is VND10.6 trillion (US$460.87 million). According to the bank, if the situation remains unchanged, the target could be achieved.

Also, Military Bank (MB) estimated a profit of nearly VND4.6 trillion (US$200 million), the number of new customers is approximately 60% of the whole year 2020.

The ratios of operating efficiency were better than in last year, with return on assets (ROA) reaching 2.71% (against 1.59% in the same period last year) and return on equity (ROE) reaching 27.24% (16.09% last year).

The non-performing loans ratio of the was about 1.14% at the end of the first quarter, much lower than the 1.46% in the same period last year. The provisioning rate for bad debts remained at a high nearly 150%.

Vietcombank also recorded high profit with about VND7 trillion (US$304.352 million), equivalent to 28% of the annual plan. This puts it well on its way toward the full-year pre-tax profit target of VND25.2 trillion (US$1.1 billion).

SeaBank also reported VND698.3 billion (US$30.36 million) pre-tax profit in the first quarter, 2.3 times higher than in the same period last year.

In 2021, the bank targets a 10% increase in total assets to VND198.23 trillion (US$8.6 billion). So far, customer deposits increased by 9.7% to VND124.3 trillion (US$5.4 billion) while outstanding loans went up 13% to VND123 trillion (US$5.35 billion).

SeaBank's pre-tax profit target is VND2.41 trillion (US$104.8 million), 40% higher than last year, with after-tax profit being about VND1.93 trillion (US$83.9 million). NPL ratio is targeted to be kept below 3%.

In its banking sector report, SSI Research analysts estimated that the pre-tax profits of listed banks increased by 55-65% on-year in the first quarter.

Of this, state-owned commercial banks have likely achieved even more spectacular growth (75-85%) by increasing provisioning to solve problematic assets.

Meanwhile, joint-stock commercial banks were estimated to have achieved pre-tax profit growth of about 45-55% on-year. Part of this came from the lower deposit rates, helping banks reduce input costs.

In fact, credit growth in the banking sector was not all that high in the first quarter. Data from the General Statistics Office showed that as of March 19, the total means of payment for the whole banking industry increased by 1.49% compared to the end of 2020 (it increased by 1.55% in the corresponding period last year).

Credit growth of the economy reached 1.47%, higher than the figure of the same period last year (0.68%) but still lower than the rate before the pandemic (in the first quarter of 2019, it was 1.9%). Credit institutions mobilised 0.54% more capital, while this figure was only 0.51% in 2020.

Assessing the profit outlook of the banking industry in 2021, FiinGroup also forecast that the growth of the after-tax profit of the 12 listed banks will be 18.2%, higher than the 14.9% in 2020. Of this, banks are forecast to have strong increases in profit, including Vietcombank (+ 14.9%), BIDV (+ 41.3%), and VietinBank (+ 41.9%).

According to FiinGroup, this positive outlook is based on both credit activities as well as services, especially the sale of bancassurance by many banks, especially the major ones such as Vietcombank, VietinBank, ACB, MSB, and HDBank.