Amid economic difficulties, many banks have proposed lowering their profit targets for this year. Experts have said that the trend will continue by the end of the year.
Several banks report decrease in their profits targets
The Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) and the Bank for Foreign Trade of Vietnam JSC (Vietcombank) have pioneered this trend.
Vietinbank has sought approval from the State Securities Committee and the Ho Chi Minh City Stock Exchange to lower their business targets for this year. As a result, Vietinbank wants to decrease its pretax profit target from 7% to negative 11%, equivalent to VND7.5 trillion (USD359.5 million).
Their total expected asset increase may be lowered from 19% to only 3.1%, while its credit growth target could be reduced from 17% to only 9%.
The bank’s dividend payment plans for its shareholders may be also lowered from 16% in shares to 13%-15%. The adjustment could be applied in December.
As of November 31, Vietinbank made a pretax profit of over VND7 trillion (USD335.6 million), meeting 94.2% of its new target, while their assets totalled approximately VND465 trillion (USD22.3 billion) during the same period, meeting 98% of this year’s new target.
Another banking giant, Vietcombank was seeking approval from shareholders to adjust their business targets for this year as it had just fulfilled 67% of its pretax profit target for the year as of the end of September.
Even though Vietcombank has yet to make public documents sent to shareholders, Viet Capital Securities Company said in their news bulletin on November 21 that the bank planned to lower its credit growth target from 17% to 12%.
The bank’s target for asset increases may be reduced from 18% to 15%. Its pretax profit target could be reduced by 12% from expected VND6.6 trillion (USD316.4 million) to VND5.8 trillion (over USD 278 million), the source said.
Meanwhile, Kienlongbank has decided to lower its pretax profit from VND620 billion (USD29.7 million) to VND530 billion (USD25.4 million) but their bad debts increased from 2% to 3%.
HDBank also wanted to adjust its profit target by holding an unscheduled shareholder meeting. However, after some delay, the bank has yet to confirm the exact date for the meeting.
Banking experts said banks seek to lower their profit targets as a result of the modest amount of loans. Despite lowering the lending interest rate to 15% by demand of the State Bank of Vietnam (SBV), the credit growth rate has remained modest.
In the first ten months of this year, the banking system recorded a credit growth rate of nearly 3%, which was much lower than the targeted 8%.
Dr. Cao Sy Kiem, former Governor of the SBV, said that it is understandable to see such a modest credit growth rate due to the large amount of bad debts and modest lending resulted from enterprises' big inventories and banks' worries of more bad debts.
“In the first eight months of this year, credit grew modestly as a result of tightened monetary policies and a sharp increase in bad debts. The country’s credit growth rate may reach from 7%-8% by the end of this year,” Kien noted.
Those experts also estimated that not only banks but many enterprises have had to adjust their profit targets due to their lack of foresight of the economic situation.
