Financial investments: banks not squandering money on stocks

Monday, May 12, 2008
After local newspapers reported that joint stock banks have made big financial investments and forecast big losses for the investments due the falling stock market, bankers have denied the losses, saying that they are not stupid enough to waste money on stocks.

An Binh Joint Stock Bank confirmed that its total securities investments are worth VND3,659bil, but said that the investments are safe as 70% of the investment money (VND2,560bil) has been injected in government bonds (considered the safest investment channel), bank bonds and corporate bonds (issued by big general corporations).

As for the VND1,098bil worth of securities ready for sale, the debt securities issued by the government are worth VND650bil. Equity securities (contributing capital to other companies or purchasing stakes of other economic institutions) are worth VND448bil only, and the money has been injected in the bank’s member companies (An Binh Securities, An Binh Fund Management Company) or the bank’s strategic partners.

An Binh Commercial Joint Stock Bank leaders affirm that in such uncertain conditions, the bank only eyes low-risk investments with stable profit, not high profit and high-risk investments.

In fact, the bank’s investments in securities so far this year have decreased by 50% compared to 2007, and thus now accounts for a very small proportion in the investment portfolio of the bank. Its leaders say the bank still holds the securities investments it made in late 2005, and if it sold the stocks at this moment, it would still make profit as it bought the stocks at low prices in 2005.

As for VIB Bank, investments in debt securities account for 99.37% of its total investments worth VND6,676bil, while equity securities just account for 0.63% of total investments. VIB Bank said that the bank did well in the first quarter of 2008, with total assets up by 110%, mobilised capital up by 90%, pre-tax profit up by nearly 80% compared to the same period of 2007.

In a letter sent to local newspapers to clarify issues relating to ACB’s investments, the bank wrote that the total sum of money it had injected in stocks by December 31, 2007 was VND1,177.973bil, only 2.8% of its investment portfolio and 1.38% of its total assets. Meanwhile, the other VND8,474.348bil has been injected in State Bank bonds, government bonds and securities issued by state owned banks and the bank for social policies, and electricity bonds. The securities prove to have no risk for the holders and they are not influenced by the current ups and downs of the stock market.

In 2007, ACB earned profit from stock investments equal to 105% of total investment value. The bank said it has recovered all of its investments from 2007.

Techcombank, citing the financial report audited by KPMG, also said that it has focused on bonds (government bonds, corporate, State Bank and commercial bank bonds), which bring the bank fixed profit, independent of the stock market’s fluctuations. Meanwhile, equity securities just account for 3.5% of total investments.

Therefore, Techcombank affirms that the conclusion that the bank will suffer losses from big investments in securities is unreasonable. (TBKTVN, DTCK)