Statistics from the financial statements of the first quarter of 2019 announced by 15 large and medium banks of Vietnam showed that there was a clear differentiation of bad debt situation among them.
Specifically, as of March 31, 2018, the total bad debt of 15 banks was over 76 trillion dong, 5.8 percent higher than the beginning of the year. In absolute value, 11 out of 15 banks increased bad debt in the first three months. However, thanks to credit growth, only nine out of 15 banks had increased bad debt to total lending ratio.
Meanwhile, the total debt of group five, which is likely to lose capital by the end of March, also rose by 4.8 percent compared to the beginning of the year, to 41.3 trillion dong, accounting for 54.3 percent of the total bad debt, while this figure was 54.8 percent at the end of 2018.
Currently, Vietnam Prosperity Joint Stock Commercial Bank (VPBank) has the highest bad debt ratio in the survey group, accounting for 3.62 percent of total loans, compared with 3.5 percent at the beginning of the year. However, this bad debt is mainly from group three, which is sub-standard debt (accounting for 53.3 percent of total bad debt) while debt likely to lose capital accounts for 25.4%.
NCB is the second bank in the survey group on bad debt ratio, at 2.72%. This number increased quite sharply compared to the 1.67%/ total loan at the beginning of the year.
Meanwhile, Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank) is one of the banks with a strong increase of 2.271 trillion dong in bad debt in the first three months, up to nearly 16 trillion dong, equivalent to an increase of 14.3%. In which, the debt is likely to lose capital at nearly 10.5 trillion dong, up by 10.8 percent and accounting for 65.7 percent of the total bad debt. VietinBank’s NPL ratio also accelerated significantly, from 1.58 percent at the beginning of the year to 1.85%.
In absolute numbers, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) is still the bank with the largest amount of bad debt, with nearly 17.9 trillion dong. However, the good news is that this figure has decreased slightly by 4.9 percent compared to the beginning of the year, mainly decreased for group four. The bank’s bad debt ratio therefore also decreased from 1.9 percent at the beginning of the year to 1.74%.
In addition to BIDV, in the past period, many banks reduced their NPL ratio compared to the beginning of the year, such as Asia Joint Stock Commercial Bank (ACB) (down from 0.73 percent to 0.69%), Saigon Thuong Tin Joint Stock Commercial Bank (Sacombank)(down from 2.2 percent to 2.14%), LienViet Post Joint Stock Commercial Bank (Lienviet Post Bank) (down from 1.41 percent to 1.36%) and Hochiminh City Development Joint Stock Commercial Bank (HDBank) (down from 1.54 percent to 1.45%)
This shows a good signal on the process of handling bad debt of some credit institutions which has been pushed faster. Credit institutions also limit the transfer of debt to Vietnam Assets Management Company (VAMC) but actively handle bad debt through selling debts, securing assets and using risk provisions.
As above, in addition to selling debt, trading island assets, the risk provision expense is also one of the popular plans that banks are using to handle bad debts.
BizLIVE statistics also showed that 8 out of 15 banks increased provisioning in the first quarter of 2019, with the total of 15 banks reaching nearly 15.2 trillion dong, slightly up 2.4 percent compared to with the same period of 2018.
VietinBank is one of the most aggressive banks to increase the most provisioned provision in the survey group when it spent more than 3.2 trillion dong, up 38 percent over the same period. The provision accounted for 50.7 percent of the bank’s net profit, making VietinBank only record 3.152 trillion dong in pre-tax profit at the end of the first quarter, slightly up 4.1 percent over the same period.
VPBank also increased the provision by 20.8 percent to 3.204 trillion dong, accounting for 64.3 percent of net profit.
In terms of absolute numbers, BIDV is still the bank with the largest provision, with 5.186 trillion dong in the first three months. However, this figure decreased slightly by 827 billion dong, equivalent to 13.8 percent over the same period.
At the Banking Overview Forum in 2019, Bui Van Hai, deputy director, Banking Supervision Department, State Bank Supervision Inspection Agency said that the process of restructuring and handling Bad debts in the system of credit institutions had so far achieved many positive results.
The most important point was that the legal framework had completed a fundamental step, mechanisms and policies to support credit institutions to restructure and handle the revised and supplemented bad debts.
Leaders of Banking Supervision Department assessed that credit quality of banks had been improved. Internal bad debt ratio has dropped to below two percent. This ratio decreased to a low level, reflecting that credit institutions were controlling well the newly arising bad debt, in addition to the results of bad debt settlement accumulated previously.
