Most banks are maintaining their on-balance sheet bad debt ratios below two percent. In particular, five banks are having bad debt ratios of just around one percent.
Among large banks, Asia Commercial Joint Stock Bank (ACB) is currently the banks with the lowest bad debt ratio.
By the end of September 2019, the bank’s bad debts were only 1.704 trillion dong, slightly up by 1/7 percent over the beginning of the year. Meanwhile, ACB’s outstanding credit increased by 11.2 percent to 254.303 trillion dong. Accordingly, the bad debt ratio was only 0.67%, down by 0.73 percent compared to the beginning of the year.
The bank’s representative said that its ratio of provisions for risks on total bad debts was about 159%, a fairly high level compared to the overall level of the system. Notably, ACB has finalised all the bonds at Vietnam Asset Management Company (VAMC). With a low bad debt ratio, the risk provisioning ratio of the bank in the first nine months of the year was only 162 billion dong.
Another big bank with significantly lower bad debt ratio than other banks is Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank). As of late September 2019, the bank’s on-balance sheet bad debts were recorded at 7.625 trillion dong, up by 22.5 percent over the beginning of the year. Vietcombank’s bad debt ratio, accordingly, increased from 0.98 percent in the end of 2018 to 1.08 percent in the end of September 2019. The bank’s bad debt coverage ratio by the end of the third quarter reached 185%. Vietcombank’s representative said that the bank aims to bring bad debt ratio to less than one percent by the end of 2019.
Similar to ACB, Vietcombank has also settled all the bad debts at VAMC. This has greatly supported the bank in reducing the bank’s annual risk provisioning burden.
In the group of small banks, Bac A Commercial Joint Stock Bank (BacABank) has the lowest bad debt ratio. The bank’s on-balance sheet bad debts at the end of September was 504 billion dong, only accounting for 0.72 percent of the total outstanding loans. This ratio is slightly higher than the 0.76 percent recorded at the beginning of the year.
For Kien Long Commercial Joint Stock Bank (Kienlongbank), the bad debt ratio as of late September 2019 was 1.07%. However, compared to the end of 2018, this ratio tended to rise (0.94 percent at the end of 2018).
Notably, Saigon Commercial Joint Stock Bank (SCB) is having the lowest on-balance sheet bad debt ratio in the system, reaching only 0.46 percent in the end of September 2019. The number of on-balance sheet bad debts have not accurately reflected the asset quality of this bank, because SCB still has up to 28 trillion dong of special bonds of VAMC (just after Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank)). The bank’s accrued interests and receivables as of late September 2019 were over 60 trillion dong (the highest in the system).
Previously, according to information of the State Bank of Vietnam (SBV), the on-balance sheet bad debt ratio of the system was 1.98 percent by the end of August 2019. The ratio of on-balance sheet bad debts, unsettled debts at VAMC, and the debts which potentially become bad debts of the credit institution system as of August 2019 stood at 4.84%, significantly down compared to the 10.08 percent in late 2016, 7.36 percent in late 2017, and 5.85 percent in late 2018. It is known that the SBV’s target this year is to keep on-balance sheet bad debt ratio below two percent.
