Asia Commercial Bank's net profit plunges 48% in 9M12

It's the largest decline ever.

According to Maybank Kim Eng, ACB’s 9M12 net profit plunged 48% YoY to VND1,087b, the largest decline the bank has ever experienced, due to gold trading losses as the bank closed its short gold position on a directive from the central bank. Surging expenses also hurt the bottom line, although profits were not heavily impacted by the arrest of ACB’s founder Nguyen Duc Kien and other executives.

Here's more from Maybank Kim Eng:

Net interest income grew 13% YoY. NII grew 13% YoY in 9M12 to VND5,303b, mostly thanks to a 37bps NIM expansion to 385bps as ACB’s loan book shrunk 19% YoY. Loans to end-customers rose 3% YoY while interbank loans plummeted 50% YoY, causing overall LDR to decline from an average of 80% in the last five years to 75% currently.

Non-interest income turns into a loss. Non-interest income turned from a gain of VND348b into a loss of VND376b in 9M12. Fee income rose 12% YoY to VND538b but this was not enough to absorb a gold trading loss of VND1,250b, equivalent to 25% of ACB’s total income. Excluding the impact of this loss, 9M12 net profit would have risen 11% YoY.

The massive losses arose because the bank was forced by the central bank to close its large, circa one million ton (according to market consensus) short gold position. ACB recently revealed it is currently short c.100,000 tonnes of gold, which could mean further losses of VND200-300b. However, the remaining losses may be spread out from now to Jun 2013, the deadline for all banks to completely close their gold positions.

Expenses surged. Operating and provision expenses surged 50% and 90% YoY respectively in 9M12, vs. average increases of 11% and 27% YoY at ACB’s peers. Part of the reason operating expenses jumped was a 28% increase in the number of the bank’s employees (vs a 14% increase at ACB’s peers). This was because the bank grew its branch network by 20% YoY vs. peers’ 8% YoY growth.