In this year, the application of regulations specified in Resolution No.42/2017/QH14 on pilot bad debt settlement at credit organisations causes banks to expect that they will quickly handle bad debt, reverse risk provisions and increase profits.
Nguyen Duc Thach Diem, CEO of Sacombank said in 2017, the bank handled 20 trillion dong bad debt. So far, Sacombank still has 50 trillion dong unsolved bad debt and collaterals are mainly properties.
Sacombank’s pre-tax profit for this year is 1.8 trillion dong. At the end of Q1/2018, the bank had more than 500 billion dong pre-tax profit, completing 27.7 percent of the entire year plan. The bad debt settlement has also had specific roadmap for each quarter and the non-performing loan (NPL) ratio will be brought from more than 4.2 percent now to less than three percent at the end of Q4/2018, with at least 15 trillion dong bad debt being handled this year.
Duong Cong Minh, Chair of Sacombank has repeated for many times that when entering the bank, he has set restructuring target in five years, though the scheme allows as many as 10 years to thoroughly settle the backlog. He calculates that it may take three years only and latest five years, and when the restructuring is completed, shareholders will receive dividends regularly, which are higher and higher.
At ACB, Do Minh Toan, CEO of the bank said in 2018, ACB strives to settle bad debt to reverse about 500 billion dong risks into profits. Therefore, with the profit target set for this year at 5.699 trillion dong, ACB is likely to attain six trillion dong. Bad debts in 2010-2011 were put for provision with 100 percent. In 2018, ACB plans to pay dividends at 30 percent. Newly arising bad debt does not increase in Q1/2018 so ACB plans to recover more than 1.5 trillion dong bad debt in 2018.
Le Anh Tuan, Chief Economist and Head of Research at Dragon Capital said bad debt of the banking sector is no longer a big concern of the economy. However, bad debt of the banking sector largely depends on each banking group.
In particular, big banks in top group do not worry much about bad debt. In 2018, Vietcombank sets the profit target at 13 trillion dong, up 14.6 percent from 2017. It is expected that the total assets as of the end of 2018 will increase 14 percent from the beginning of the year, the capital and credit mobilisation will touch 15 percent, and the NPL ratio will be lower than 1.5 percent.
Vietcombank has just announced business results in Q1/2018. Specifically, as of March 31, 2018, the bank had 7.894 trillion dong bad debt, up 27 percent from the beginning of the year, mainly due to the sharp increase of debt in Group 3 from 684 billion dong to 2.009 trillion dong.
Though the next banking group (Techcombank, MB, ACB, etc.) is still strengthening the bad debt settlement to recover and strengthen growth, there needs to have more time. For the remaining group of small and ailing banks, as lending focused on some relevant partners who have not recovered so far, these banks are difficult to settle bad debt.
However, according to the assessment of economic and financial experts, the strong recovery of banks will be stronger in 2018-2019, asset quality will be better and great provision will be reversed. Profit is also expected to be more positive than the previous years, except for some small and ailing banks.
OCB said the provisioning in 2018 was 500 billion dong (including 20 percent bad debt put for provision by VAMC), but it is more likely that the entire bad debt of 728 billion dong VAMC bonds will be recovered, and provision will not have to be put. However, the management board has not included this in the estimation about two trillion dong pre-tax profit in 2018.
CEO of SCB Vo Tan Hoang Van said the bank handled and recovered about four trillion dong bad debt in 2017 while working out many operations to strengthen the bad debt settlement this year. SCB’s target in 2018 is to handle and recover 4-5 trillion dong bad debt.
“We are stepping up efforts to strengthen the settlement of bad debts that the bank sold to VAMC in the previous years, reducing risk provision”, said Van. In spite of newly arising bad debt, according to the bank leader, basically in 2018, SCB will strive to handle bad debt and will start reversing risk provisions from 2019.
