Statistics from banks’ financial statements showed that by the end of the first quarter (Q1) 2019, 22 banks still kept more than 84.2 trillion dong of bad debts, up by 5.6 percent compared to the beginning of the year. In particular, the group 5 debt also increased by four percent (the common rate of 23 banks), reaching more than 46.4 trillion dong.
The group 5 debts include the debts which are considered irrecoverable, mainly debts that are overdue for more than 360 days; debts with restructured repayment term, which are overdue for a period of 90 days under the restructured repayment period; debts to be recovered under inspection conclusions but have not been recovered more than 60 days after the deadline specified in the inspection conclusions; etc.
Commercial Joint Stock Bank for Industry and Trade (VietinBank) is currently having the largest volume of irrecoverable debts, reaching 10.488 trillion dong, up by nearly 11 percent compared to the beginning of the year. Previously, the irrecoverable debts of the bank also sharply rose in 2018 from 5.217 trillion dong to 9.470 trillion dong, equivalent to a 45 percent increase.
Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) followed VietinBank with more than 17.8 trillion dong of bad debts, in which irrecoverable debts accounted for 7.231 trillion dong, slightly up by one percent compared to the beginning of the year. However, compared to the same period of 2018, the irrecoverable debts of BIDV sharply increased by 22.6 percent.
For Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), the irrecoverable debts, despite still reaching over five trillion dong, have declined significantly by 37 percent compared to a year ago. Two other banks recording over four trillion dong of irrecoverable debts included Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) with 4.926 trillion dong and Saigon Hanoi Commercial Joint Stock Bank (SHB) with 4.008 trillion dong.
Notably, the irrecoverable debts (the debt group which banks have to provision at a rate of 100 percent) tended to continue rising in the first three months of 2019 although they already rose fairly strongly in 2018.
Seventeen out of 22 surveyed banks recorded increase in group 5 debts in the first three months of 2019. In particular, some banks saw sharp increase such as Techcombank (36 percent), Vietnam Prosperity Commercial Joint Stock Bank (VPBank, 15 percent), VietinBank (11 percent) and Asia Commercial Joint Stock Bank (ACB, 11 percent).
In addition, the group 5 debts still accounted for the largest proportion in the structure of bad debts with 55 percent, while this proportion was 20 percent for the group 4 debts and 25 percent for the group 3 debts.
At many banks, irrecoverable debts accounted for more than 70 percent, such as Vietcombank (71 percent), Sacombank (87 percent), SHB (74 percent), Techcombank (79 percent), Vietnam International Commercial Joint Stock Bank (VIB, 76 percent), ACB (79 percent), etc.
Although the issuance of Resolution 42 has helped banks take initiative in selling and recovering bad debts. However, the process of handling secured assets of banks is still difficult and takes a lot of time. While existing bad debts have not been completely settled, the risk of bad debt arising from the new loans always exists after a period of high credit growth.
Those are the reasons why irrecoverable debts can hardly decline and still account for a large proportion in the structure of bad debts.
Nevertheless, according to many banks, the sharp increase of the group 5 debts in the recent time partly came from the return of the bad debts which were previously sold to Vietnam Asset Management Company (VAMC) because VAMC’s special bonds expired or banks actively repurchased the debts from VAMC for self-handling. In this direction, the significant increase of the group 5 debts has a positive meaning, showing that bad debt situation is more substantial and banks are more active in settling bad debts instead of hiding them.
