Credit institutions in Ho Chi Minh City posted a year-on-year 16.5 percent decrease in profits in the first half, something analysts said was predictable given the stagnant economy and high bad debt levels.
According to a recent report by the HCMC branch of the State Bank of Vietnam, profits stood at VND4.76 trillion (US$225.3 million).
Of this, 88.3 percent came from lending, down 1.9 percentage points year-on-year.
The majority of banks based in HCMC have yet to report their first half performance. So far, Sacombank is among few banks to perform well with pretax profits reaching VND1.45 trillion to make up 52 percent the year's target.
Economist Dinh The Hien said banks and financial companies had prepared themselves for worse performance than last year over concerns about the economic slump.
Lending is forecast to improve the remaining months, but there will hardly be a chance of credit seeing robust growth, he said.
Loans have expanded 4.5 percent this year in the entire banking system, the slowest pace compared to the same periods in almost a decade.
Economist Nguyen Tri Hieu said that if banks could achieve the targeted credit growth of 12 percent for this year, the majority of them would still face lower profits or losses.
"There will still be increases in risk provisions as bad debt [cleanup] has not improved."
As of May, around 14 banks with headquarters based in HCMC have set aside over VND8 trillion for provisions.
Non-performing loans at banks in HCMC have been up by 11 percent from the end of last year to VND52.3 trillion, or 5.85 percent of total loans in the city.
Of this, loans with the highest potential of losses accounted for as much as 67 percent.
Commercial joint stock banks have the largest amount of bad debts with VND24.28 trillion, while financial companies posted the highest bad debts/total loans ratio of 45.3 percent.
The ratio at foreign banks is 2.88 percent.
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