Local banks expect their profit margins to swell in the second half of 2011 in light of expected macroeconomic improvements.
Scores of local banks, particularly small- and medium-sized ones, have set modest profit targets for 2011 in the face of current economic vulnerabilities.
For example, GiaDinh Bank set a 2011 profit target of VND380 billion ($18.3 million), Ficombank VND381 billion, OCB VND400 billion, TinNghia Bank VND550 billion and Southern Bank VND600 billion ($28.9 million).
Inflation pressures have brought bank deposit rates to high levels, leading to banks’ escalating input costs, while banks found it hard to increase lending, according to bank executives at the recent annual bank executives conference.
They also said tightened monetary policies, the central bank’s decision to contain outstanding loan growth of less than 20 per cent in 2011 and restrict lending to non-productive areas have put a dent in banks’ first quarter pretax profits.
Big banks with marked advantages in personal financial services also admitted they would not fulfill initial profit targets set for 2011. Some banks even produced dual profit targets for this year. For example, DongA Bank initially attempted to reap VND1.3 trillion ($62.8 million) in profits which was later brought down to VND1.185 trillion ($57.2 million) at the bank’s recent annual general meeting of shareholders.
However, its general director Tran Phuong Binh said the bank would possibly make its initial profit target come true in light of macroeconomic improvements in the second half of the year, particularly when inflation was bridled and bank rates began to relax.
Supportive of the idea, Sacombank chairman Trinh Van Thanh assumed bank rates would be eased from late second quarter or early third quarter of 2011.
Deputy head of State Bank’s Ho Chi Minh City branch office Nguyen Van Dung urged banks to be of sound mind to adopt suitable profit targets in 2011 amid current market vulnerabilities.