The upcoming annual general meeting (AGM) will be the time that banks disclose their expected profit target for 2018. Compared to 2017, many banks have put forward high profit plan, but feasibility is a consideration.
Techcombank started the 2018 AGM season with the profit plan of 10 trillion dong, up from eight trillion dong attained in 2017 and became a “historic” figure for a private joint stock commercial bank so far.
According to documents for the upcoming AGM, VPBank identified this year’s pre-tax profit plan at 10.8 trillion dong. Last year, this bank also gained 8.1 trillion dong pre-tax profit.
Vietcombank Chair Nghiem Xuan Thanh said the 2018 pre-tax profit target was initially expected at 12 trillion dong but was then raised to 13 trillion dong to achieve higher growth rate.
In 2017, HDBank attained the consolidated pre-tax profit of 2.420 trillion dong, and individual pre-tax profit of 2.040 trillion dong, an increase of 2.1 times from 2016. HDBank targets a 2018 pre-tax profit increase of 65.3 percent to 3.921 trillion dong, with outstanding credit growth expected at 34.99 percent, raising the outstanding loans to customers to 148.510 trillion dong.
In April 2017, most commercial banks will officially enter AGM season. Here, business targets in 2018, including profit, will be revealed.
It is known that most banks set profit growth rate at around 25-30 percent, and few banks are ambitious to grow 60 percent like HDBank.
* Bad debt risks need to be taken into account
Besides high profit growth targets, many banks are cautious with 2018 business plan, in which the main cause stems from bad debt.
Duong Cong Minh, Chair of Sacombank said last year the bank attained more than 1.488 trillion dong pre-tax profit, an increase of 9.5 times from 2016. The non-performing loan (NPL) ratio at the beginning of 2017 was 6.68 percent out of the total outstanding loans. The NPL ratio decreased to 4.28 percent at the end of 2017 and was expected to fall to three percent in 2018. Sacombank’s pre-tax profit plan set for 2018 is 1.640 trillion dong.
“Sacombank’s most important target in this year is to accelerate the restructuring process following the approved scheme, giving priority to the bad debt settlement to enhance asset quality”, said Minh.
Eximbank’s CEO Le Van Quyet said the bank attained more than one trillion dong pre-tax profit in 2017, increasing more than 2.5 times from 2017 and hitting more than 169 percent of the set plan. Therefore, Eximbank cleared the accumulated loss and expected to bring EIB shares out of special control status during the past two years.
“At the beginning of 2018, besides achieved results in 2017, Eximbank continued focusing on solving challenges, shortcomings in previous years to healthilise operations, etc. Regarding 2018 profit targets, the bank’s board of directors and board of executives will consider giving a suitable level to this year’s situation”, said Quyet.
BIDV has also reported the pre-tax profit of more than 8.8 trillion dong in 2017 but the bank still has large amount of bad debt i.e. 13.950 trillion dong, reckoning for 1.61 percent of the total oustanding loans as of the end of 2017, causing BIDV to put for provision nearly 15 trillion dong.
According to assessment of finance and banking experts, in 2018, credit organisations will have to continue putting for provision 20 percent of special bond value after selling debt to Vietnam Asset Management Company (VAMC).
Accordingly, credit organisations with a large balance of special bonds will continue suffering from negative impacts from provisioning costs, while few other credit organisations that have completed the bad debt settlement will have a smoother business year. Therefore, despite high profit targets for this year, banks still cannot avoid risk reserve pressures in 2018.
According to Nguyen Tri Hieu, finance and banking expert, banks’ profits are expected to improve in this year thanks to increased credit. Therefore, competition in the maintenance and expansion of credit market share will be increasingly intense. Lending rates are decreasing while capital mobilisation cost is difficult to decrease because of increased input rates. Therefore, banks should be careful about setting targets.
