Small banks face problem in reaching profit targets

In the first eight months of the year, the Orient Joint-Stock Commercial Bank’s (OCB) pre-tax profit was VND225 billion (US$10.7 million), much lower than compared to its yearly target of VND500 billion ($23.8 million).

OCB general director Trinh Van Tuan said the bank would try to find more earnings from all of its activities to reach its goal by year-end.

The Gia Dinh Joint Stock Commercial Bank’s profit goal this year was VND380 billion ($18.2 million), said a representative of the bank.

But in order to do so, the bank would have to obtain credit growth to VND10.6 trillion ($509.6 million), nearly tripling last year’s figure of VND3.6 trillion ($173 million)

Meanwhile, the central bank has capped all banks’ credit growth at 20 per cent, and has asked them to keep loans for the non-production sector at under 16 per cent until the year-end.

Many big banks have also said that it would be difficult to reach profit targets this year ahead of schedule.

Dang Van Thanh, chairman of the Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank), said by September 30 the parent bank’s pre-tax profit was estimated at VND 2.17 trillion ($104.3 million), while its yearly target was up to VND2.8 trillion ($134.6 million).

According to independent market watchdogs, in the first half of the year, pre-tax profits of many banks accounted for only 30 per cent of their yearly plans.

This means that the banks would have to make great efforts to fulfil their remaining profit targets for the rest of the year.

Meanwhile, the domestic market in the next months is expected to meet many difficulties, one of which is the possibility of high inflation at the year-end.

In addition, many enterprises do not want to borrow bank loans at this time while their production activities are stagnant. In addition, both foreign and domestic markets face many negative fluctuations.

The current lending interest rates at banks are high, compared with many companies’ payment abilities. This has made them unattractive to enterprises.