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Bad debts decreased

Profit reports of commercial banks in Q1 of this year all hit the mark of several trillion Vietnamese dongs. Specifically, HDBank has just announced that its estimated pre-tax profit in the first quarter exceeded VND2 trillion, up more than 67 percent compared to the same period last year. Of which, profit from services was two times higher than that in the same period for the third consecutive quarter. By March 31, this year, this lender’s credit growth rose by 5.2 percent compared to that by December 31, last year.

MBBank also informed that its profit was estimated at over VND4.57 trillion, 2.1 times higher than the same period last year. The non-performing loan (NPL) ratio dropped sharply from 1.46 percent at the beginning of the year to 1.14 percent.

At the annual general meeting of shareholders (AGM) in early April, ACB leaders said that its profit in Q1 was estimated at above VND3.1 trillion, up more than 61 percent. Sharing at the AGM 2021, MSB’s leaders informed that its net revenue in the first quarter was more than VND2 trillion, an increase of 65 percent year-on-year, leading to an estimated pre-tax profit of VND1.2 trillion, 315 percent higher than the same period last year.

As for the State-owned commercial banks, although the AGM has not been held, Vietcombank’s leaders said that its pre-tax profit in the first quarter was estimated at VND7 trillion, up 34 percent year-on-year and equal to 28 percent of the target of VND25.2 trillion set for the whole year. With a positive Q1 profit, its profit target set for 2021 is within reach. In fact, Vietcombank is assigned the highest credit target among State-owned banks with 10.5 percent while other banks are only at the level of 6-7.5 percent. Many experts said that VietinBank can achieve a profit of US$1 billion this year, thanks to the shift of retail channel and the reduction of the bad debt burden.

In a recent report of SSI Research Center, it is estimated that the pre-tax profit of listed banks in Q1 will increase from 55 percent to 65 percent compared to the same period last year. Of which, State-owned commercial banks will possibly achieve a growth of about 75-85 percent, and joint-stock commercial banks are expected to achieve pre-tax profit growth of about 45-55 percent. The reason for the high growth in Q1 was because lenders have maintained relatively attractive margins and credit prospects have been improved. In addition, most banks have accelerated the write-off of bad debts and increased provision for bad debts in the fourth quarter of last year.

Investors’ expectation of the banking industry’s profit picture is also the reason why banking stocks, namely CTG, VCB, ACB, and MSB, jumped by 40-50 percent in the first quarter.

Optimism in 2021

According to SSI Securities Company, currently, the net profit margins of banks are at a record high. Savings interest rates decreased by 2.25 percent per annum upwards in 2020, and in the first quarter of 2021, some banks continued to cut another 0.1-0.4 percent. These reductions focus on short-term deposits. Currently, most banks are keeping deposit interest rates at a level of 3-4 percent per annum for terms below six months, 3.5-5.5 percent per annum for terms from six to below 12 months, and 4.6-6 percent per annum for terms of 12 months upwards. Although the deposit interest rates sharply dropped to a record-low level, capital mobilization of commercial banks remained extremely positive. Banks’ loan-deposit gap from the beginning of 2020 to now has been strongly widened. Therefore, the net interest margin of most commercial banks had increased robustly in the second half of last year and is now at a historic high level of about 4 percent compared to the normal level of only 3.5 percent. This is one of the reasons why bank profits have soared.

With optimistic business results in Q1, many commercial banks continue to set high growth plans and are confident of completing their profit plans. According to the evaluation of the profit outlook of the banking industry in 2021 of FinnGroup Joint Stock Company, it is forecasted that the growth of after-tax profit of 12 listed commercial banks will be at 18.2 percent this year, higher than the growth of 14.9 percent last year. In which, State-owned banks are expected to have a strong increase in profits, such as Vietcombank with 14.9 percent, BIDV with 41.3 percent, and VietinBank with 41.9 percent. This positive outlook comes from both credit activities and service revenue, especially revenue from bancassurance of many banks, especially large banks like Vietcombank, VietinBank, ACB, MSB, and HDBank, said a representative of FinnGroup Company.

Besides, the representative of VNDirect Securities Company said that the State Bank of Vietnam has just issued Circular No.03/2021 amending and supplementing Circular No.01/2020 on restructuring, exemption, and debt rescheduling for customers affected by the Covid-19 pandemic. The circular also added a provision for a gradual 3-year allocation of provision for bad debts, which will also help reduce provision expenses for banks, especially in 2021. With the optimistic profitability of banks, banking stocks will still be one of the most potential stock groups in the stock market this year.

Fashion retailers like H&M have suffered from negative comments, photo Le Toan

As a consequence of integrating the “nine-dash line” map into online shopping websites in the Chinese market, a great number of local young people have called for a boycott on the Swedish fashion brand, causing a week-long desert atmosphere to drift over most of its outlets in Vietnam.

Xuan Huong, a 22-year-old student based in Hanoi, said that as soon as the case flared up, she became no longer interested in shopping with H&M.

“I was very disappointed,” Huong stressed. “I used to be a fan of the brand because of the reasonable prices and eye-catching designs of most items. But from now, I may never purchase anything from H&M due to its disrespect to Vietnamese consumers who they have earned from for more than three years.”

Dung Thang, a 25-year-old officer in the capital’s Ba Dinh district said, “Before this incident I had no intentions to buy any items from H&M because their quality is not good while also being overpriced. Now, this case has only cemented my decision.”

Over a period of three days last week across Hanoi’s stores in Vincom Nguyen Chi Thanh and Vincom Mega Mall Royal City, there was a visible drop in the number of shoppers venturing into the store while visiting the malls. It was reported that customer numbers in other H&M outlets in Vincom Times City, AEON Hadong, and Vincom Mega Mall Ocean Park were slightly better, but not a patch on before the pandemic.

A staff member in Vincom Times City even revealed that the number of customers is fewer than in 2020 at times when people were more inclined to avoid going out unless necessary. “The store last year was even more crowded than now,” the staff member said.

Facing near emptiness for over a week, H&M Vietnam’s daily sales are at a large risk of seriously plunging, potentially interrupting its revenue targets in Vietnam for 2021. H&M’s financial report two years ago highlighted that the fashion brand earned on average VND3 billion ($130,000) per day based on revenues of VND1.12 trillion ($48.7 million) for eight stores at the time.

“We have yet to offer any statements for now,” said Pham Ngoc, head of Communications and PR at H&M Vietnam when asked about the potential trouble ahead.

Indeed, the fashion brand has experienced a tough time in Vietnam since early last year when the pandemic broke out. Its entire batch of establishments there had to close during social distancing, deepening the pressures on leasing and staff costs.

Over the second quarter of last year when the health crisis reached a peak, H&M’s net sales in the Vietnamese market was $7.77 million, down 32 per cent on-year, according to company reports covering the first six months of 2020.

Its revenue in other markets also dropped significantly during the timeline. In China, the clothes maker’s net earnings decreased by 28 per cent to $262 million. Nevertheless, the report noted, the country of 1.4 billion people remains its third-largest market, following Germany and the United States.

China takes on an even greater importance as H&M’s performance in Germany and the US are growing wearier, as reflected by revenues dropping by 42 per cent and 71 per cent, respectively.

In 2018, according to Bloomberg, the company declared high amounts of stockpiles worth $4 billion, equivalent to 17.6 per cent of its turnover of the year’s first quarter, while profit was at a 16-year low. As of February of that year, H&M’s net profit reduced to 44 per cent on-year, equivalent to $167.4 million.

Under pandemic-induced lockdowns, the brand has shut 250 stores across the globe since October – after already closing 140 stores in 2018. Along with H&M, other fashion retailers like Zara and Gap have been forced to close thousands of stores worldwide for the same reason.

Commenting on the prospects for the fashion industry, Benjamin Simmenauer, professor at the French Institute of Fashion in Paris, said that the sector will find it hard to rebound because fashion is dependent on the seasons and with designs changing quickly. “Brands are finding themselves left with huge stocks on their hands,” said Simmenauer.

Marguerite Le Rolland, an analyst at Euromonitor, also said that in the short-to-medium term, consumers’ need for fashion items “is going to be fairly diminished” due to the strong reduction of disposable income. “The pleasure and social aspect of shopping for fashion is going to be very difficult to maintain with social distancing measures still in place,” Rolland added.