In the face of the complicated situation of the Covid-19 epidemic, banks are focusing on promoting debt restructuring for customers.
Kienlongbank said the bank’s outstanding loan structure is mainly business households and individuals, accounting for more than 74 percent of outstanding loans, equivalent to 25.136 trillion dong. Not now, but since the beginning of March 2020, Kienlongbank has reduced 25 percent of the total interest payable to more than 85,000 customers who are borrowing and repaying by instalments on daily basis to share difficulties with customers during the pandemic season. As planned, the programme to reduce interest rates will finish by June 30, 2020. According to representatives of Kienlongbank, most of customers who borrow instalment loans are low-income people such as selling lottery tickets and motorbike taxi drivers.
As of mid-April 2020, Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) restructured trillions of dong of outstanding loans to more than 5,000 individual and corporate customers, and also provided additional trillions of dong of new loans with preferential interest rates to customers affected by Covid-19.
VPBank said that in the current context, in parallel with supporting customers such as debt rescheduling, restructuring, and reducing interest rates, selective growth and good risk control were the most important goals set by the bank.
VPBank’s financial report for the first quarter of 2020 showed that the debt recovery continued to be focused on, helping to reduce the consolidated bad debt ratio of VPBank from 2.95 percent at the beginning of the year to 2.59 percent at the end of the first quarter, the bad debt ratio of the parent bank decreased from 2.18 percent to 2.15%, thereby contributing to the consolidated operating income of 9.906 trillion dong, up 24.4 percent over the same period last year.
Bad debts were in a downward trend, but VPBank remained cautious when making provisions of 3.712 trillion dong, up 26.1 percent over the same period last year (excluding the impact of VAMC bond outstanding in 2019) during the complicated situation of the disease.
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) is also one of the active banks in debt restructuring, rescheduling, and non-transfer of debt groups to support customers affected by Covid-19.
By the end of the first quarter of 2020, Vietcombank’s bad debts reached 0.82%, a slight increase compared to the beginning of the year partly due to the provisioning of 2.152 trillion dong, an increase of nearly 43 percent over the same period. According to that, Vietcombank’s first quarter profit is 5.333 trillion dong, down by 11.14 percent y-o-y. According to Vietcombank, the bank promotes the risk provisions in order to prevent bad debts to increase sharply in the near future.
At Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), the bank continues to carry out preferential credit programmes with interest rates reduced by up to two percent per year compared to credit programmes that have been implemented before the outbreak and belong to the group with lowest interest rates in the market recently.
The total scale of the programmes is up to 60 trillion dong, in which the businesses in supplying essential goods during the pandemic are prioritised.
According to Chair of the Board of directors of VietinBank, Le Duc Tho, this is a period when the whole economy must unite and overcome difficulties. Therefore, it is necessary for banks to sacrifice part of their income in this period to accompany, support and share difficulties with customer.
According to the State Bank of Vietnam (SBV), from the beginning of the year until now, the expected debt balance affected by Covid-19 is about two quadrillion dong, accounting for about 23 percent of the whole system’s outstanding debt. In case the epidemic is well controlled in the second quarter, the bad debt ratio (including on-balance sheet debts, debts sold to VAMC and debts that have been classified) will be close to four percent by the end of this quarter and 3.7 percent by the end of 2020, maybe even higher.
This may affect the progress of restructuring associated with dealing with bad debts of credit institutions, as well as the resilience of weak credit institutions.
Therefore, raising the provision for banks in Q1/2020 is considered as one of the preparatory steps for the increase of bad debts in the near future.
