Major state-controlled banks in Vietnam posted big profits in 2016 thanks to rapid credit growth and continued improvement in the local economy.
Positive Notes from State-controlled Banks
Bank for Industry and Trade of Vietnam (VietinBank), where the government holds a 64.46% stake, reported a pre-tax profit of 8.25 trillion dong ($365 million) for 2016, increasing 12% from a year earlier.
This figure makes VietinBank, in which the Bank of Tokyo-Mitsubishi UFJ takes a 19.73% share, the largest profit maker in the local banking system. Its ROE and ROA stood at 10.9% and 1%, respectively.
The Hanoi-based lender’s total assets grew 22% year-on-year to 947 trillion dong ($41.9 billion). Its total outstanding loans expanded 18% from 2015 to reach 720 trillion dong ($31.86 billion) at end-2016.
Notably, the bank’s bad debt ratio was brought down to 0.82%, the lowest among local lenders.
For its part, Bank for Foreign Trade of Vietnam (Vietcombank
), 15% owned by Japan’s Mizuho Bank, saw its pre-tax profit up 25% year-on-year to 8.21 trillion dong ($363.36 million).
, in which the government controls a 95.28% stake, reported a pre-tax profit of 7.5 trillion dong ($331.86 million) in 2016, representing an annualized increase of 7%.
Its total assets soared 17.5% year-on-year to over 1,000 trillion dong ($44.25 billion), the biggest amongst local banks.
Wholly state-owned Vietnam Bank for Agriculture and Rural Development (Agribank) posted a pre-tax profit of four trillion dong ($177 million), its all-time high. Its trouble loan ratio dropped to below 3% after years of restructuring.
Mid-size Lenders See Upsurge
Tien Phong Bank (TPBank), 4.99% owned by the International Finance Corporation (IFC), earned a pre-tax profit of 707 billion dong ($31.3 million), growing 12.93% year-on-year.
TPBank’s total assets expanded 38.8% last year to 105.8 trillion dong ($4.68 billion).
Vietnam International Bank, in which Commonwealth Bank of Australia owns a 20% stake, witnessed its pre-tax profit up 7% year-on-year to 702 billion dong ($31 million).
The rise in the bank’s profit was drawn by a 25% expansion of its credit that reached 68 trillion ($3 billion) at end-2016. Its total assets touched 105 trillion dong ($4.64 billion).
According to the State Bank of Vietnam, total credit grew 18.71% in 2016, higher than an expansion of 17.29% in 2015. The figure is targeted at 18% this year.
The outlook of the Vietnamese banking system is expected to become brighter in the years to come as banks have set aside huge provisions for credit losses, said Truong Van Phuoc, vice chairman of the National Financial Supervisory Commission.
The combined profit of local banks was estimated to have increased 10% year-on-year to 40 trillion dong ($1.77 billion) in 2016 although provisions have totaled 70 trillion dong ($3.1 billion).
Banking expert Nguyen Tri Hieu, however, has cast doubt over the profitability of banks given unclear accrued interests and provisions.
Ratings said in a report in November 2016 that an improving macroeconomic environment with a stable currency and benign inflation should counteract structural systemic weaknesses of Vietnamese banks, which supports the stable outlook for the sector in 2017.
Moody's Investors Service last month forecast the outlook for the banking system in Vietnam (B1 stable) to remain stable over the next 12-18 months, thanks to the country’s macroeconomic stability and resilient economic growth.