Vietnam banks exceed profit targets for 2009

Jan 25, 2010, 7:30 GMT

Hanoi - Vietnamese commercial banks reported larger-than-expected profits in 2009, partly due to government subsidies, a banker said Monday.

Asia Commercial Bank reported pre-tax profits of 152 million dollars in 2009, 118 per cent above its target, according to local newspaper An Ninh Tu Do.

A billion-dollar government stimulus program mainly composed of subsidies for commercial loans encouraged enterprises to borrow money, said Dao Trong Khanh, chief executive of the Tien Phong Commercial Joint Stock Bank.

Vietnam Technological and Commercial Bank showed a profit of 125 million dollars, 40 per cent above its target, while profits at Vietcombank, the country's largest private lender, reached 167 million dollars, 16 per cent above target.

The An Ninh Tu Do report said the profits were in large part due to the government subsidies, which covered 4 per cent's worth of interest payments on commercial loans.

But economist Le Dang Doanh said the main source of bank profits had been the interbank market. Banks with large reserves served as vital sources of liquidity in several periods of foreign currency scarcity during the year.

Asked whether he thought the government should limit the profits that banks are able to make from government intervention, Doanh disagreed.

'There is no question of any Obama-type situation here,' Doanh said.

He was referring to pressure on US president Barack Obama to limit or tax banks' profits after huge government bailouts last year.

Economist Nguyen Quang A agreed that banks' profits had come chiefly from other sources, including gold and bond trading.

The Vietnamese government planned for credit growth of 25 to 27 per cent in 2009, but the subsidies drove credit growth up to 37.7 per cent by year's end. Several analysts have warned the credit growth risks sparking inflation in 2010.