Banks in turn hold their Annual general Meeting (AGM) in April 2019. Plans to boost profits and even prudent steps have been released. However, the option chosen by many banks is re-purchasing bad debts that were previously sold to Vietnam Asset Management Company (VAMC).
In October 213, VAMC accepted to acquire bad debts of credit institutions (CI) but did not pay in cash but in special bonds with a term of five years.
Accordingly, instead of having to fully provision for the risks of the bad debts or provision at a ratio of above 20%, depending on the level of overdue of each bad debt item sold to VAMC as usual, banks can provision for risks at 20 percent each year in five years.
Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank) was the first bank to sell bad debts to VAMC. After that, VAMC in turned signed to buy bad debts from many other banks such as Saigon Commercial Joint Stock Bank (SCB), Saigon Hanoi Commercial Joint Stock Bank (SHB), Petrolimex Group Commercial Joint Stock Bank (PGBank), etc. VAMC purchased nearly 40 trillion dong of bad debts in 2013.
Meanwhile, according to the 2018 audited consolidated financial statements of 21 banks which have been announced, the total value of bonds held by VAMC is more than 109.327 trillion dong. This number does not include BIDV’s as the bank has not published its audited financial statement and Agribank’s.
Currently, the list of banks which have cleared off bad debts at VAMC includes five banks: Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Military Commercial Joint Stock Bank (MBBank), Orient Commercial Joint Stock Bank (OCB) and Vietnam International Commercial Joint Stock Bank (VIB). In addition, Asia Commercial Joint Stock Bank (ACB) is about to be in the list. In particular, in a recent statement, Agribank’s leader said that the bank is capable of buying all the bad debts sold to VAMC ahead of schedule and timely settle the bad debts arising in 2019.
In the context when the on-balance sheet bad debt ratio is low and banks have gained fairly high profits in recent year, the trend of buying back bad debts to clear off debts at VAMC is becoming more popular.
Specifically, although Tien Phong Commercial Joint Stock Bank (TPBank) has just recently released the business plan in 2019, it also said it plans to buy all or part of VAMC bonds this year, depending on the amount that exceeds the pre-tax profit.
And it seems that TPBank’s business situation in the first quarter 2019 is supporting its plan as it recorded 853 billion dong of profit, up by 66 percent over the same period of 2018, equivalent to 26.7 percent of the profit plan. (The first quarter is often sees the lowest results in the year according to the operation cycle of Vietnamese commercial banks in general).
Meanwhile, Kien Long Commercial Joint Stock Bank (Kienlongbank) recorded very good results in 2018 with all indicators growing well compared to 2017. Thanks to that, at the recent AGM, Kienlongbank’s leader said that the bank will focus on recovering bad debts and strive to settle all special bonds of VAMC before December 31st 2019.
According to the document of the 2019 AGM of BIDV, the bank will strengthen the solutions to recover debts with potential risks, on and off-balance sheet bad debts, debts sold to VAMC and settle all VAMC bonds in 2019.
Similar to BIDV, Vietnam Prosperity Commercial Joint Stock Bank (VPBank) also expects to focus on resolving the bad debts sold to VAMC in 2019, which are currently 3.160 trillion dong in value. To buy back the bad debts sold to VAMC, VPBank has no other way than sacrifice profits to make risk provisioning. After fully provisioning, in the coming years, when the bad debts are completely dealt, this provisions will be reversed into profits.
Previously, Export Import Commercial Joint Stock Bank (Eximbank) announced the document of AGM with the goal of buying all debts sold to VAMC in 2020 under the restructuring policy of the SBV.
