Banking sector reaping profits from securities market
05/05/2007 -- 9:58 PM
Ha Noi (VNA) – Viet Nam's banking sector has been flourishing thanks to the major role it has been playing in the domestic securities market, say financial experts.
Commercial banks in Viet Nam have been recording massive growth and now lead all economic sectors in the remittance of taxes to the State budget.
The Sai Gon Join Stock Bank (Sacombank) led the charge by posting profits of 544 billion VND (34 million USD) in 2006, the highest recorded profit ratio of its 15 years in operation. In the first quarter of this year alone, the bank earned 302 billion VND (18.87 million USD), up a staggering 188 percent on the year.
The Viet Nam International Bank (VIBank) also joined in by racking up profits of over 200 billion VND (12.5 million USD) last year, doubling its 2005 total and 64 billion VND (4 million USD) for the first quarter of 2007.
Market experts said that the banks were piggybacking to profits on the red-hot securities markets, which allowed banks to generate revenue from other services, particularly in investments, credit cards and financial management.
The surging securities markets have also enabled banks to attract larger amounts of capital. According to the State Bank of Viet Nam (SBV), almost all commercial banks by the end of the first quarter this year had at least 1 trillion VND in chartered capital, outstripping set government targets.
Combinations of the growth of the bourses, high bank dividends and investor confidence have allowed share issuances by banks to become blue chip buys for investors.
However, industry insiders have called for strict monitoring of the financial sector as increased banking profits have emboldened investors to attempt to establish more banks, with the number of banking licence applications pending at the SBV mushrooming over the last year.
In order to deal with the situation, the Securities Committee and the SBV have put in place a new framework to restrict capital flows from banks to the securities market. New regulations have been issued to restrict banks in handing out loans to their own securities companies and tighten the management of mortgage-backed securities.-Enditem
