Banks expect a bumper crop The season for the banking world’s annual general meetings is fast approaching as shareholders pay particular attention to issues of bank profit, bourse listings, the safety of bank deposits, and the reshuffling of senior personnel.   Personnel restructuring at the top and tighter procedures are among the factors that might define the 2018 financial year  Aligning performance with targets For those large banks that completed the 2017 financial year on a high note, aiming for a higher performance in 2018 is justifiable, especially if they want to impress their shareholders at the annual general meeting (AGM) held in March and April. A number of banks have set a higher target for profit, revenue, and credit growth in 2018, based on their positive performance in 2017. State-owned giant Vietcombank, for instance, targets a credit growth at 16 per cent, deposit growth at 17 per cent, and total assets growth at 14 per cent. The bank’s pre-tax profit is also expected to advance from its 2017 figure of VND11 trillion ($500 million) to VND12 trillion ($545.45 million) this year. Top lenders in terms of assets, like VietinBank and BIDV, also target a boost in their assets, deposit, and credit growth. VietinBank anticipates a 15-17 per cent growth in total assets this year, together with its deposit growth of 18-20 per cent and credit growth at 16-17 per cent. BIDV, meanwhile, anticipates its credit and deposits to grow at around 17 per cent. However, for some smaller banks, setting a high profit target could be a double-edged sword, as they may struggle to reach the set goal. Leaders of those banks, as a result, may not always look forward to the AGM season. Take National Citizen Bank (NCB) for instance, who gained just over VND30 billion ($1.36 million) in pre-tax profit last year, or VietABank, whose pre-tax profit merely sat at VND150 billion ($6.81 million), much lower than its original set target of $253 billion ($11.5 million). VietABank’s deposit mobilisation and credit growth targets were not even close to being met, which put the bank in great difficulty when wanting to raise the charter capital to VND4.2 trillion ($190.9 million). Sector progress Despite the mixed performance results reported at large and small lenders, bank shareholders are counting on the recovery of the economy this year, which in turn can support further growth in the banking sector. Additionally, the health of local lenders is expected to continue improving over the year, with the issue of bad debts to be specifically addressed. With these, the price of bank stocks looks to be reinstated against previous years. Over the course of 2017, several listed banks experienced an ample boost in their stock. The newly listed VPBank and HDBank, in particular, witnessed a massive 40 per cent increase in their stock price. Other lenders, such as TPBank, are known to be preparing for their listing on the Ho Chi Minh City stock exchange in the second quarter of 2018, with TPBank’s shareholders already approving the plan to raise capital through the private placement of 87.6 million of stakes. Meanwhile, Fitch Ratings has upgraded the long-term issuer default rating (IDR) of Military Bank to ‘B+’ from ‘B’ with a stable outlook, and its viability rating up to ‘b+’ from ‘b’. At the same time, the agency also upgraded the viability ratings of Vietcombank and VietinBank to ‘b’ from ‘b-’. The long-term IDRs of Agribank, VietinBank, and Vietcombank have been affirmed at ‘B+’ with a positive outlook. The IDR of ACB has been affirmed at ‘B’ with a stable outlook. The positive rating action, according to Fitch, takes into account the Vietnamese banking system’s enhanced operating environment, with improved economic policy-making from authorities promoting macroeconomic stability and predictability. “This has enabled banks to significantly reduce their exposure to legacy problem loans that have long weighed on their balance sheets and offsets, in part due to the banking system's long-standing structural weaknesses – such as thin capital buffers and weak profitability – which we expect to be more adequately addressed over the longer term,” the agency said. Change in senior positions Numerous banks, meanwhile, will likely restructure their management board – as is the case with Kienlongbank and Sacombank who plan to reappoint their CEO, or at least select new members for the board for the tenure ending 2020. Eximbank, likewise, is expected to elect two additional members for its board during the AGM scheduled for April 27. Tightened procedures Another concern that may arise among shareholders at upcoming AGMs is the issue of the safety of deposit and savings transaction, due to the recent scandal of missing savings at Eximbank. As the issue is not exactly new – a few scandals of this kind have occurred in recent years – shareholders are likely to request their banks to review the safety procedures on savings and deposit transactions in a detailed and practical manner. Undertaking Basel II recommendations, in this case, can assist local banks in identifying material risks and adopt better risk management techniques. “Should it [Basel II] be implemented and applied in an appropriate manner, it can help banks to operate in a safe way,” said economist Le Xuan Nghia. Bank customers, according to economist Nguyen Tri Hieu, need the security given by banks for their savings. For shareholders, on the other hand, the lack of security on savings and deposits will mean a loss to the banks’ performance and capital, and subsequently damage shareholders too. “As things have happened to those banks whose customer’s savings have gone missing, it is a real red flag placed on the financial system, where tightened procedures ought to be carefully implemented in a bid to avoid any similar outrages happening again,” said Hieu. VIR