At three big banks including Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) and Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), the total on-balance sheet bad debts reached up to 41.265 trillion dong by the end of June 2019, up by 6.5 percent compared to the beginning of the year. Compared to a year ago, the on-balance sheet bad debts of these three banks have increased by 22 percent.
The common point of these banks is that the irrecoverable debts accounted for a very high proportion (over 50 percent) of the total bad debts.
BIDV posted the most on-balance sheet bad debts in the system with 21.121 trillion dong by the end of June 2019, up by 12.3 percent compared to the beginning of the year. In particular, the debt group 5 irrecoverable debts sharply rose by 46 percent to 10.492 trillion dong, and the debt group 3 sub-prime debts increased by 12 percent to 6.105 trillion dong. The bank’s debt group 4 doubtful debts declined by 27 percent to 4.524 trillion dong.
With the sharp increase, irrecoverable debts continued to account for the largest proportion (up to 50 percent of the total bad debts). The ratio of bad debts on total outstanding credit at BIDV increased from 1.9 percent in the beginning of the year to 1.98 percent in the end of June.
Meanwhile, the value of bad debts at Vietcombank after the first six months of 2019 went up by 910 billion dong, equivalent to nearly 15 percent, reaching 7.134 trillion dong. Accordingly, the bad debt ratio of the bank also inched up from one percent to 1.03 percent.
The debt group 3 of Vietcombank saw the strongest increase, up by nearly six times compared to the beginning of the year, reaching 1.670 trillion dong. Meanwhile, the debt group 4 fell by 40 percent to 702 billion dong, and the debt group 5 slightly declined by 0.2 percent to 4.762 trillion dong.
At Vietcombank, the debt group 5 is accounting for up to 67 percent of the total bad debts. However, the bad debt pressure at Vietcombank is not significant when the bank has a high Loan Loss Reserve ratio of 180 percent, and it has cleared off all the debts at Vietnam Asset Management Company (VAMC) while BIDV and VietinBank still hold tens of trillion dong of VAMC bonds.
Among three banks, only VietinBank recorded bad debt decline in the first six months of the year. The bank’s on-balance sheet bad debts by the end of June were 13.010 trillion dong, down by five percent compared to the beginning of the year. In particular, the debt group 5 and 3 respectively declined by 22 percent and 14 percent to 7.348 trillion dong and 1.829 trillion dong, respectively; while the debt group 4 sharply increased by 84 percent to 3.833 trillion dong. BIDV’s irrecoverable debts still accounted for up to 56 percent of the total on-balance sheet bad debts.
A large amount of outstanding VAMC bonds has not been released by VietinBank and BIDV. Previously, by the end of 2018, BIDV still had more than 14 trillion dong of bad debts at VAMC, and this number was above 13 trillion dong at VietinBank. In particular, BIDV and VietinBank set aside more than 7.6 trillion dong and 2.230 trillion dong for risk provisioning.
All the three banks continued to raise the provisions for risks in the first half of 2019. At VietinBank, the risk provisioning costs soared by 63 percent to 4.236 trillion dong, eroding up to 66 percent of the bank’s net profit. Meanwhile, the risk provisioning expenses at BIDV also rose by 6.8 percent to 10.710 trillion dong, accounting for 69 percent of the total net profit. The provisions for risks at Vietcombank slightly increased by 2.5 percent to 3.317 trillion dong.
