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Banking & Finance

Vietinbank Q1 profit at $89.7mn

Released at: 20:56, 03/05/2017

Vietinbank Q1 profit at $89.7mn

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Higher risk provision expenses put dent in bank's after-tax profit in first quarter.

by Duy Anh

A surge in risk provision expenses of 43 per cent year-on-year resulted in Vietinbank’s after-tax profit recording modest growth of just 6 per cent year-on-year to VND2.04 trillion ($89.7 million) in the first quarter, the bank’s consolidated financial statement for the period shows.

As at March 31, Vietinbank’s total assets stood at VND987.4 trillion ($43.4 billion), up 4 per cent year-on-year. Total customer lending rose 5.4 per cent to VND690.3 trillion ($30.36 billion) and customer deposits 1.7 per cent to VND666.3 trillion ($29.3 billion).

Its bad debt ratio went up from 1.02 per cent as at the end of 2016 to 1.13 per cent as at March 31. Total debts in Group 3, 4 and 5 - substandard debt, doubtful debt and potentially irrecoverable debt - increased VND1.17 trillion ($51.5 million) in the quarter to VND7.92 trillion ($348.3 million).

Net profit from operating activities before credit provision expenses saw strong growth of 20 per cent year-on-year to VND4.61 trillion ($202.7 million). However, due to the 43 per cent year-on-year increase in credit provision expenses, the bank’s after-tax profit came in at only VND2.04 trillion ($89.7 million), up 6 per cent year-on-year and equivalent to 29 per cent of the annual plan.

Within the bank’s revenue structure, interest income rose 15 per cent year-on-year to VND6.16 trillion ($270.9 million), net profit from foreign currency trading surged 20 per cent, and services and securities trading both increased 36 per cent.

On top of that, net profit from other activities rose 64 per cent year-on-year from VND400 billion ($17.6 million) in the first quarter of 2016 to VND655 billion ($28.8 million) as at March 31. Only securities investment activities saw a loss, of nearly VND18 billion ($791,640), against a profit of VND31.5 billion ($1.4 million) a year ago.

During the bank’s annual general meeting (AGM) last month, CEO Le Duc Tho said the bank would improve its super-micro customer and small- and medium-sized enterprise segments this year.

Vietinbank expects to increase its total assets by 14 per cent year-on-year in 2017 to more than VND1,086 trillion ($47.84 billion), raise its pre-tax profit by 3 per cent to VND8.8 trillion ($387 million) and pay a 5-7 per cent dividend.

Vietinbank has not yet completed its acquisition of PG Bank, as the two sides have not finished all necessary procedures to obtain approval from authorities. Chairman Nguyen Van Thang told the AGM that all documents relating to the merger of the two banks were submitted to the central bank in 2016.

After reviewing the documents, the central bank asked Vietinbank to review and update the result of an assessment of PG Bank’s share price and re-calculate and discuss the conversion ratio between the two banks’ shares, Mr. Thang said. Vietinbank has engaged auditors Deloitte Vietnam to re-assess the price of PG Bank’s shares and re-calculate the ratio for converting PG Bank shares into Vietinbank shares, he said, adding that the two banks are in talks to finalize and submit the results to the central bank.

Under the previous agreement that was approved by the shareholders of the two banks in 2015, the ratio was set at 1:0.9, with each PG Bank share equal to 0.9 Vietinbank shares.

Based on that ratio, Vietinbank would issue an additional 270 million shares in exchange for 300 million PG Bank shares. Another 30 million shares would be issued to Vietinbank’s current shareholders.

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