Investment & Finance

VietABank losing luster

SGI

VietABank was once a well-known bank in the market about ten years ago when its shares held high value. However, since 2011, its business has been losing its luster and its shares have been at record low of just around VND 2,000-3,000/share.

Customers are being served at VietABank.

Customers are being served at VietABank.

In the first nine months of this year, the bank has not yet shown any signs of improvement, rather there have been many falls in several of its business segments.

Business in continuous fall

The financial statement released by VietABank for 3rd quarter 2019 shows that in the past nine months, the bank has seen drops in several of its business sectors. In credit services, which is its main business area, net profits reached VND 336.6 billion, indicating an 8.5% year-on-year fall. Profits from its foreign exchange and securities services were very low also, at just below VND 1 billion. Most notably, its service activities suffered a loss of more than VND 1.8 bn. The bank’s net operating profits saw a year-on-year drop of more than 12%, at just VND 196 bn.

VietABank’s net accumulated profits in the first nine months fell by 12.5%, at VND 788 bn; its service activities lost VND 8.6 bn, which is higher than VND 5.7 bn loss last year; securities services and business activities respectively dropped by 15% and 63% over the same period in 2018. Profits from investments in the securities segment were over VND 1 bn and profits from other activities soared by 272% to reach almost VND 35 bn.

However, VietABank has cut down largely on risk prevention funds in 2019. Therefore, the net profits decreased but the gross profits still increased. In 3rd Quarter 2019, for instance, with its risk prevention funds dropping sharply to VND 125.9 bn (which were at VND 195.4 bn in 3rd quarter of 2018), its pre-tax profits rose by 53.2% to reach VND 70 bn. Its net accumulated operating profits in the first three quarters fell sharply by 24.1%, but its risk prevention funds were cut down by VND 133.7 bn (a decrease of 37.3%), making the bank’s pre-tax profits increase by 10%, reaching VND 152.4 bn.

In late September, total property of VietABank rose by 1.9% over the beginning of the year to reach VND 72,680 bn, in which, the balance of loans to customers increased by 12.8%, reaching VND 42,768 bn; and raised funds from the customers went up by 10.2%, reaching VND 45,589 bn. In 2019, VietABank has planned to have total property of VND 75,652 bn, with VND 49,364 bn raised from economic organizations and individuals, making a pre-tax profit of VND 281 bn. Although it has cut down on risk prevention funds to increase profits, its business activities over the past nine months were rather gloomy, compared with last year, causing the nine month earnings to reach just 54% of the plan, making it extremely difficult to reach its profit goal in the remaining three months of the year.

In its financial statement of 3rd quarter of 2019, VietABank continued to ignore detailed descriptions, making its financial index and bad debts very unclear. VietABank is now one of the 18 banks in the audit list of the State Audit Office of Vietnam with a plan to conduct activities in accordance with Resolution 42/2017/QH14 (Res. 42) on pilot activity to deal with bad debts of credit institutions.

Fading brand

VietABank was established in 2003 on the basis of merging two credit institutions which were then Saigon Finance Corporation and Da Nang Rural Commercial Bank, with initial charter capital of VND 76 bn. In 2010, VietABank had a charter capital of VND 3,000 bn and the amount increased to VND 3,499 bn in 2015. Since mid-2011, Mr. Phuong Huu Viet, former Chairman of Viet Phuong Investment Group, has held the position of Chairman of the Board of Management of VietABank, with his personal ownership at 4.52% and Viet Phuong Investment Group with 10.85%.

Mrs. Phuong Thanh Nhung, Mr. Viet’s niece, who used to be General Director and Vice Chairwoman of the Board of Management, has held more than 4%, and her husband Mr. Tran Viet Anh has held 2.15% of VietABank shares. After Mr. Phuong Huu Viet and his relatives became the biggest shareholders, VietABank began to be involved in scandals, where the big shareholders mortgaged and transferred VietABank shares to different credit institutions although the stock acquisition in VietABank has not been completed.

While several major powerhouses are expanding their networks with gigantic investments in modern equipment and services, VietABank is facing countless challenges, suffering from poor management and even has the same shareholders for several years.
After that period, it became more difficult for the bank to raise capital. 2018 was the third consecutive year that VietABank planned to increase its capital to VND 4,200 bn. After its failure in 2016 and 2017, the bank planned to deal with its business in two ways: either issuing 35 million shares with a dividend rate of 10% and issuing 35 million shares only to investors; or issuing only 70 million shares to investors. Till now, however, the bank’s charter capital still trods on water at VND 3,500 bn.

When referring to VietABank, investors still remember how in the past the bank was a well-known brand headquartered in Ho Chi Minh City and its huge efforts in business activities during the years 2012-2013. In 2013, VietABank signed a comprehensive strategic cooperation agreement with Phuoc Son Gold Company, with a credit contract worth USD 18 million. But the fluctuation in the gold market in this period caused losses to Phuoc Son Gold Company and it ended its business in 2014. As a result, VietABank reported losses of hundreds of billions of dong from its gold and foreign exchange business activities.

In 2015, VietABank officially moved its headquarters in Ho Chi Minh City to Hanoi, and the brand has been fading considerably in the market since. The most notable feature about this bank today is that it is often referred to as one of the minor commercial banks that always tries to launch fund-raising campaigns at high interest rates. In April, for example, the bank issued certificates of 24-month deposits with an annual interest rate of 9.1%. In June, VietABank introduced a promotional program for savings with an annual interest rate of 8.8% for 15-month savings accounts and 9% for 16-month savings accounts.

Such incidents have also made the bank’s share price go down. In the 2009-2010 period, VietABank shares on the OTC trading floor were at more than VND 10,000/share, but they began to fall in 2011 and were just VND 3,500/share in the 2015-2017 period. In mid-2017 till 2018, the securities market improved again, but the shares of this bank were offered at only VND 6,000 each at the highest and now they are barely above VND 2,000 each on the OTC floor. Since 2016, the bank has continuously failed to even distribute dividends to its shareholders.

Translated by Nguyễn Gia

Bảo Trân

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