In a review meeting on state budget revenue in 2015, the National Assembly's Committee on Finance and Budgeting highlighted that income from the banking sector had reduced considerably.
Income from banking sector reduced considerably
Insurance market revenue in 2015 increased by 24.42 percent on the previous year and stock market capitalisation increased by 14 percent, while foreign investments into Vietnam also reached over USD15bn. However, bank revenues were low.
Cao Sy Kiem, a member of the National Monetary Policy Consulting Committee, said the banking system contributed tens of thousands of billions VND each year so a drop of 20 percent is huge.
Can Van Luc, deputy director of BIDV Bank, said banks had struggled to cut bad debts from five to less than three percent and contributed to the risk management fund at the same time. "Bank profits have dropped sharply. Of course there are banks that saw profits but a lot of small banks incurred losses. That's why the return on equity of the banking system increased but much lower than other regional countries. Our return on equity is six percent while the average return in the region is 10 to 15 percent," Luc said.
The banking system plays an important role in the structure of domestic financial market as it accounts for 75 percent, while the remaining 25 percent is the stock, bond and insurance markets.
The Vietnamese financial market was equal to 191 percent of GDP in late 2014 when a huge number of credit facilities and insurance companies were founded. However, they were small and incapable of competing on a regional basis.
"The banking sector reflects the health of our economy. When profits and contributions to the state budget drop then it indicates the economy isn’t particularly healthy," Kiem said.
In addition, the insurance companies, especially state-owned ones, mainly deposit their money to earn interest instead of making investments.
