Currency trading profitability largely depends on exchange rate developments. The exchange rate witnessed significant fluctuations last year, according to industry insiders.

In 2015, the State Bank of Vietnam (SBV) devalued the dong three times and loosened its trading bands twice, leading to cumulative depreciation of five per cent in the domestic currency compared to the dollar.

“Dealing in foreign exchange was truly risky over the past months, especially for banks having a negative foreign currency balance,” said Nguyen Tri Hieu, a banking and finance expert.

Since the beginning of this year, central bank has been adjusting the dollar/dong rate daily instead of maintaining a long-term fixed rate.

The rate is now set based on exchange rate changes in the inter-bank foreign exchange market, as well as on monetary developments in countries involved in Vietnam’s trade, investment and financing ventures.

The SBV expects the daily-adjusted rate to enable it to ensure its management objectives, while allowing exchange rate flexibility as per global monetary fluctuations.

According to news website ttvn.vn, VPBank lost 290 billion dong ($12.9 million), an increase of 220 per cent over the previous year.

Techcombank lost 192 billion dong ($8.5 million), after the bank earned a profit of nearly 23 billion dong ($1 million) in 2014.

Currency trading whittled away profits of Vietnam International Bank, as the bank lost 24 billion dong ($1.1 million) in the foreign exchange market in 2014, and 10.5 billion dong ($467,000) in this market in 2015.

Several other banks profitted from currency trading last year, but profitability diminished significantly.

Vietinbank, one of the largest banks in Vietnam, earned a profit of 19.7 billion dong ($876,000) in the foreign exchange market last year, a 95 per cent decline from the previous year.

Eximbank, at which currency trading was a major service, earned a profit of more than 62 billion dong ($2.8 million) in the foreign exchange market in 2015, 64 per cent less than in 2014.

Vietcombank posted a profit of 44 billion dong ($1.9 million) from currency trading in the fourth quarter of 2015 alone, an 83 per cent fall from the same period in 2014.

Specialists at Vietcombank securities say opportunities exist for banks to improve their foreign currency business earnings, with the central SBV applying a daily-adjusted reference exchange rate.