Small banks have their backs against the wall    
Industry News

Source : Vietnam Investment Review

Small banks will struggle to fulfill their 2011 profit targets following a recent banking authorities’ decision to retain outstanding loan growth of less than 20 per cent.

GiaDinh Bank planned to reap VND380 billion ($18.3 million) in pretax profits in 2011 against 2010’s VND75 billion and offer shareholders a 10 per cent dividend against 2010’s 4 per cent.

However, to rake in such big profits the bank must achieve the target of having VND10.6 trillion ($512 million) worth in total outstanding loans by the year end which will be almost triple 2010’s VND3.663 trillion.

Meanwhile State Bank Directive 01/CT-NHNN on March 1, 2011 on keeping outstanding loans’ growth of less than 20 per cent in 2011 was applicable to all banks irrespective of their capital size.

GiaDinh Bank reportedly raised its chartered capital from VND1 trillion to VND2 trillion in late 2010 and is set to hike it to VND3 trillion ($144.9 million) in the coming period.

VietA Bank initially set its outstanding loans growth to 63 per cent in 2011. However, after receiving a warning from the State Bank Ho Chi Minh City branch office, the bank downwardly revised the rate to 20 per cent as regulated by banking authorities.

Viet A Bank also envisages 73 per cent hike in pretax profit in 2011 against 2010’s VND347 billion ($16.7 million).

As with Mekong Bank, the bank worked out pretax profit and outstanding loan figures of over VND360 billion and VND4.729 trillion in 2011, respectively, up 170 per cent and 197 per cent on-year.

“Commercial banks need to clearly orientate their business plans for 2011 to make them compliant with central bank’s commitment to tightening credit growth in the year,” said State Bank Ho Chi Minh City branch deputy director To Huy Lam.

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