RETAIL BANKING | Cesar Tordesillas, Vietnam

Reports of fat Vietnam bank profits inaccurate: inspectors

Central bank inspectors revealed that banks’ profit in Vietnam for 2011 was not as big as reported by many commercial banks.

The State Bank’s inspectors have emphasized that the profit reported by commercial banks by December 31, 2011, does not truly reflect the real business performance of commercial banks, because a lot of expense items had not been counted on.

Analysts have agreed with the inspectors that the banks’ finance reports did not count on all kinds of expenses. The debt classification and provisioning were only made on bank loans. Meanwhile, they did not consider the risks in their investments, such as the investment in bonds and other securities.

Under the current regulations, the debt classification and provisioning against risks are the works carried out quarterly. In order to calculate profit of the fourth quarter, banks had to use the figures updated by December 15. This means that the banks’ reports did not show the actual provisioned money amount for the whole year.

State Bank’s inspectors have confirmed that the bad debt of credit institutions unceasingly increased, especially in

The State Bank’s Inspection Unit revealed that only a few banks could make such fat profits in 2011, and that the banks’ average profit was not as high as people think.

According to the unit, the post-tax profit of the whole banking system in 2011 was 15.1 percent higher than that in 2010. The profit growth rate was lower than that of the previous years, while the stockholder equity growth rate was 22.85 percent and the assets growth rate was 18.55 percent.

Furthermore, 50 percent of the credit institutions saw the profit down in comparison with 2010. Ten percent of commercial banks reportedly performed badly, thus leading to losses.

In 2011, the ROA index (return on assets) and ROE (return on equity) of credit institutions, the two most important indexes which can show the health of banks, were 1.09 percent and 11.86 percent, respectively.

Meanwhile, the figures were 1.29 percent and 14.56 percent, respectively, in 2010.

If comparing with the other 10 sectors of the national economy, one would see that the banking sector’s ROE is at the medium class (ranks 6/10), while the ROA at the deepest low.

Meanwhile, the ROE of the banks in South East Asia is some 14-15 percent, while 17 percent is the average level in the world.

Claims by commercial banks about making fat profits in 2011, mostly from the lending activities, angered many from the business circle who suffered from overly high loan interest rates.

Local newspapers have reported that while production and service enterprises have been fluttering, the 71 commercial banks have been living well.

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