Some gets benefits and others get less profit because of exchange rate

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Stable exchange rates help businesses export goods to markets with strong currency appreciation against the US dollar to increase sales. Photo: ST.

Enterprises benefit greatly

Vietnam National Petroleum Group - Petrolimex has just released its consolidated financial statements for the third quarter of 2019 with net sales increasing by 5 percent to reach VND 48,640 billion. Meanwhile, profit after tax increased 25 percent to VND 1,112 billion. According to Petrolimex, profit increased mainly due to the impact from financial activities. In the third quarter of 2019, the average USD / VND exchange rate decreased slightly by 0.3 percent.

Accordingly, in the third quarter of 2019, Petrolimex recorded VND 47 billion in profit from financial activities, while the same period last year lost VND 246 billion, due to the third quarter of 2018, the average exchange rate of USD / VND increased by 1, 8 percent compared to the second quarter of 2018, resulting in exchange rate differences. In the first nine months of 2019, the profit from financial activities was negative VND 80 billion, much more positive than the loss of VND 505 billion in the same period last year. In particular, the exchange rate difference, according to the explanation of the detailed business results report, in the first nine months of 2019, the exchange rate difference brought about more than VND 10 billion to Petrolimex while in the same period last year, the group suffered a loss of VND 246 billion. This target also contributed to the group's growth of 14 percent of profit after tax of nine months, reaching VND 3,640 billion although accumulated revenue decreased by nearly 2 percent

Similar to Petrolimex, in the third quarter of 2019, PetroVietnam Power Corporation (PVPower) recorded about VND 65 billion of exchange rate difference profit, while the same period last year suffered a loss of VND 398 billion. This target, together with the growth of revenue, helped PVPower net profit of VND 793 billion, more than four times the same period last year.

At Sao Ta Food Joint Stock Company (FIMEX), an enterprise specialising in exporting shrimp to Japan, the EU and US, the profit after tax in the third quarter of 2019 also recorded growth of 31 percent, reaching VND 76 billion although net sales during the period improved slightly by 4 percent. As explained by FIMEX management, the USD / VND pair which is more stable than in the third quarter of 2018 pulled down the company's financial costs, helping increase profits. Accordingly, financial activities brought FIMEX VND 700 million in the third quarter of 2019 while in the same period of 2018 this target amounted to VND 10.4 billion.

With a large foreign currency loan, Nhon Trach 2 Petroleum Power Company (NT2) also benefits significantly from exchange rate stability. According to management, in the third quarter of 2019, the exchange rate difference due to revaluation of payables in foreign currencies was VND 49.6 billion, while the same period last year lost more than VND 49 billion. Thanks to that, financial activities in the period created profit of VND 16 billion, creating much more positive than the loss of VND 87 billion in the third quarter, 2018. Thanks to that, the company's profit after tax is VND 162 billion, 6.5 times higher than the same period in 2018 although revenue only increased by 7.6 percent.

Banks got "bitter fruit"

While many businesses obtained fruit from the stability of the exchange rate, the profits of many banks were lost due to foreign exchange trading although overall results were still very positive.

At VPBank, while all other activities such as lending, services and securities trading achieved high growth, foreign exchange trading brought about VND 81 billion in losses in the third quarter of 2019. While in the same period of 2018, this activity earned nearly VND 218 billion. In nine months, VPBank saw a loss of VND 117 billion from foreign exchange trading and it was VND 251 billion in the same period last year.

VIB bank reported a loss of nearly VND 115 billion from forex trading in the first nine months of 2019, much less positive than the loss of nearly VND 21 billion in nine months of 2018.

Bac A Bank also lost VND 4.2 billion from foreign exchange trading in the third quarter of 2019, lower than the VND 550 billion profit achieved in the same period last year. In nine months, Bac A Bank recorded a profit of only VND 3 billion from foreign exchange business, while nine months of 2018 was VND 9.6 billion.

Not so much as a loss from foreign exchange business as the above banks, but foreign exchange trading activity also brought Maritime Bank nearly VND 49 billion, down 61 percent compared to the results achieved in the third quarter of 2018. In the first nine months, Maritime Bank recorded VND 97 billion in profit from foreign exchange trading while in the same period in 2018 it hit VND 295 billion.

Similarly, interest from forex trading at many banks also recorded a significant decrease. Specifically, Saigonbank earned VND 1.1 billion in the third quarter of 2019, down 87 percent. In nine months, this target dropped by 68 percent to VND 6 billion. SeaBank also recorded a 78 percent decline, reaching approximately VND 15 billion in the first nine months of 2019. ACB also dropped by 12 percent in the third quarter of 2019 and fell nearly 6 percent, reaching only VND 142 billion and VND 291 billion; Techcombank also dropped 63 percent in the third quarter of 2019, reaching VND 18 billion and down 44 percent in the nine months of 2019, reaching VND 138 billion.

Meanwhile, some banks still recorded positive results from foreign exchange trading. For example, Vietinbank recorded VND 401 billion in the third quarter of 2019, an increase of 120 percent compared to the third quarter of 2018; for nine months, foreign exchange business saw a profit of VND 1,189 billion up by 120 percent. Sacombank's foreign exchange profit also increased by 31 percent in the third quarter of 2019 and increased by 35 percent in the first nine months of 2019, reaching VND 202 billion and VND 422 billion respectively.

Forex trading is considered a "double-edged sword" because besides high profitability, there is great risk. According to SSI Securities Company, while major currencies are highly volatile, there are currencies that depreciate by 8-11 percent (such as the Korean KWR and the Swedish SEK) but there are also currencies appreciating 5-7 percent (such as Russian REB, Thai THB) against USD, VND has become one of the rare currencies with stable exchange rates against USD. From the beginning of the year, VND once created a wave from the end of April to the end of May, but the buying rate of banks at the peak of the wave also increased by only 0.84 percent ​​compared to the end of 2018, at VND 23,360 / USD, then quickly cooled. Even when huge and sudden pressure from USD / CNY exchange rate surpassed 7.0 and CNY continued to decline, the decrease was up to nearly 4 percent in August only; VND remained flat, and even decreased.

It was due to the decline that many banks lost tens of billions. Meanwhile, enterprises with large foreign currency loans, especially loans in USD, JPY, EUR, cut financial costs over the same period when revaluing foreign currency transactions in the period and the number ending balance of foreign currencies. Besides, businesses exporting goods to markets with strong currency appreciation against the US dollar also have the opportunity to increase their sales.