Banks eye profit growth despite pandemic

18 out of 19 banks on the country’s three bourses target an average growth of 4.9 percent in pre-tax profit this year, a turnaround from their earlier forecast that profit would fall 11.9 percent, according to a report by financial data provider FiinGroup.

In the second quarter some banks achieved pre-tax profit growth of over 20 percent year-on-year, including VIB (up 41 percent), HDBank (40 percent) and Vietinbank (39 percent).

Of the 10 lenders who have published their first half results, five have achieved half of their profit target for the full year.

But the 4.9 percent growth year-on-year represents a huge drop from around 30 percent in the last two years.

This is because they were hit in turn after their customers, businesses and individuals were affected by the pandemic, FiinGroup said.

The financial health of businesses and their ability to repay debts have declined and people’s incomes have dropped, and these factors could affect the quality of credit in the near future, it added.

A deputy CEO of a state-owned bank, who asked not to be identified, said there could be rising provisions for bad debts in the coming months, which could eat into profits.

Banks have been cautious in providing loans to preclude a possible rise in bad debts. The State Bank of Vietnam had warned that if the pandemic crisis continued into the second quarter, the bad debts ratio could increase to 7 percent or even higher by the end of the year.