Vietnam's banks stay in the black despite economic difficulties

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Many banks booked profits even after a bad year for the banking sector, but an expert warned some lenders may be hiding the truth.

Vietinbank, the country's largest listed lender, posted a pre-tax profit of VND8.1 trillion (US$385 million), up 76 percent from 2010, news website VnExpress reported. The profit was lower than the target of VND8.5 trillion but it still put Vietinbank ahead of all other lenders.

Vietcombank, Vietnam's fourth-largest lender by assets, recorded a gross profit in 2011 of VND5.7 trillion, an increase of 4 percent from the previous year.

Other banks including Eximbank, ACB and Techcombank all had a pre-tax profits of around VND3 trillion or more, according to VnExpress, which said that even several smaller banks managed to post profits of more than VND1 trillion.

However, Cao Sy Kiem, a former central bank governor, told VnExpress that considering the difficulties faced by many banks last year, it may be necessary to take a second look at the high profits that have been reported.

Only one third of Vietnamese lenders are strong and deserve to have high profits; one third are average while the rest face liquidity problems and rising bad debts, he said.

Some banks may have hidden information or offered loans too easily just to have an impressive balance sheet, Kiem said. If that is the case, such banks will eventually face really huge losses, he added.

Many bankers admitted that their return-on-equity ratios are not really high, varying between 15 and 20 percent only.

"Compared to many other businesses who have very low equity ratios and heavily depend on bank loans, the return-on-equity of banks is much lower," one of the bankers said.

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