DongA Bank, VietABank fail to meet financial goals

Lenders failed to meet their financial goals last year and expected to face challenging time due to the government’s tight and cautious monetary policy this year, according to reports of two commercial banks at their annual general meeting (AGM) last week.

Shareholders vote at the annual general meeting of the oil drilling firm PV Drilling (PVD) in HCMC (Photo:Minh Tri)

DongA Bank announced at the AGM that its pretax profit in 2010 increased 9 percent year-on-year to VND858 billion (US$43 million), making 78 percent of the target.

The failure came from the fact that the Ho Chi Minh City-based lender had to offer depositors high interest rates in an effort to ensure the capital adequacy ratio regulated by the central bank since other banks kept raising their rates last year.

The state bank’s measures to put an end to the online trade in gold bullion and restrict the precious metal’s deposits and loans also lowered DongA’s earning rate sharply, the bank said.

The slumping stock market saw the lender’s securities firm suffer heavy losses, while the operational expense increased steeply as DongA opened more braches and set up more ATM machines.

But it was not all bad news as the bank’s return-on-equity, capital-adequacy and bad-debt ratios remained positive, reaching 19 percent, 11 percent and 1.6 percent repestively. DongA also announced it would offer shareholders a dividend rate of 14 percent.

The bank announced this year’s target of a pretax profit of VND1.3 trillion ($65 million), with a dividend rate of 15 percent. However, some shareholders worried that the target was too high amid the difficult times this year.

General director Tran Phuong Binh of DongA Bank said the bank could accomplish the goal easily as it made a profit of VND220 billion in just the first two months of the year.

Responding to shareholders’ questions about why DongA has not planned to list on the stock market and look for foreign strategical partners, Binh said “the stock market remained bearish, with bank stocks plunging in the last three months of 2010.”

“DongA planned on an issue of 150 million shares to raise its registered capital to VND6 trillion ($300 million) from VND4.5 trillion, of which 90 million shares will be offered to foreign partners,” the chairman said, without disclosing who the partners are.

VietABank said at its AGM last week that it made a pretax profit of VND347 billion ($17.35 million), making nearly 70 percent of the target only. Therefore, the bank had to lower the dividend rate by 3 percent to 12 percent.

VietABank also blamed the government’s tight monetary policy, accerlerating inflation and the central bank’s instruction on increasing capital reserve rates for its low results.

The share price of the HCMC-based lender is around the face value of VND10,000, with very low liquidity. Thus, the bank’s shareholders were content as it pay dividend in cash.

“The bank set the dividend for 2011 at 12 percent, which is lower than the depositing  interest rate of 14 percent per year. Therefore, what do shareholders benefit from keeping shares in VietABank?” shareholder Phan Trong Tan asked at the AGM.

Chairman Do Cong Chinh answered “VietABank has made a great effort to target the dividend rate of 12 percent since the central bank tightened the credit growth rate this year.”

“With the deposit rate of 14 percent per year, the lending rate of 17 percent per year and the profit margin of 3.5 percent, the net profit is low. Only 10 percent of the total depositing amount are long-terms, while the remainders are short-term of one or three months,” Chinh said.

By Mai Thao – Translated by Vu Minh

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