Although the on-balance sheet bad debt ratio of listed banks was 1.72 percent in the end of the first quarter (Q1) of 2019, higher than the 1.63 percent recorded in the same period of 2018, the Loan Life Coverage (LLC) ratio at most banks improved in the quarter with average LLC increasing from 84.9 percent to 86.3%.
Saigon Securities Incorporation (SSI) has released a report on Q1 2019 business results of listed banks, in which the report on the banking sector had many notable details.
According to SSI data, as of March 31st 2019, 17 banks listed on the three stock exchanges recorded 6,720 trillion dong in total assets, 476.4 trillion dong in equity, up by respectively 1.1 percent and 5.9 percent compared to the end of 2018. In particular, some banks having high equity growth in Q1 2019 included Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) with 14.2 percent (thanks to the completion of the issuance of 111 million shares for GIC and Mizuho), Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) with 14 percent (issuance of 100.6 million shares at 10,000 dong per share for existing shareholders), Asia Commercial Joint Stock Bank (ACB) with 6.5%, and Tien Phong Commercial Joint Stock Bank (TPBank) with 6.6 percent thanks to the increase of undistributed profit.
The total operating income of listed banks was 67.898 trillion dong, up by 10 percent compared to the same period of 2018, in which the income from interests, services, foreign exchange and gold rose up by respectively 16.4%, 47.8 percent and 41.7%; while the income from securities, capital contribution and other activities all sharply fell. The income from interests still accounted for large proportion (79%) in the total income.
The total after-tax profit in Q1 2019 was 20.691 trillion dong, up by 12.1 percent compared to the same period of last year.
SSI’s report pointed out some key features in Q1 2019 business results of banks. Firstly, the growth of customer loans was slower than the same period of 2018, due to the narrowing of Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank).
Specifically, the total outstanding loans (excluding the corporate bond balance due to the lack of detailed explanation) as of March 31st 2019 was 4,435,451 billion dong, up by 3.4 percent compared to the beginning of the year, lower than the 4.1 percent recorded in Q1 2018. The decline of VietinBank’s outstanding loans (decreasing by 0.4 percent in Q1 2019 while increasing by 4.5 percent in the same period of 2018) was the main reason.
Excluding VietinBank, the credit growth in Q1 2019 of 16 remaining banks was 4.4%, higher than the four percent achieved in Q1 2018, in which the top five banks with strongest growth belonged to TPBank (9.8%), Military Commercial Joint Stock Bank (MB, 6.7%), Vietcombank (6.4%), Vietnam International Commercial Joint Stock Bank (six percent) and Saigon Commercial Joint Stock Bank (5.6%).
Secondly, the mobilisation growth in Q1 2019 fell and was lower than credit growth.
According to SSI’s data, compared to the end of 2018, the total mobilisation (customer deposits and issuance of valuable papers) as of March 31st 2019 was 5,170 trillion dong, up by 3.1 percent and lower than the credit growth (3.4%). Excluding VietinBank, the Q1 2019 mobilisation growth was also just 3.7%, still lower than the credit growth (4.4%).
“Thus, from having a similar growth with credit (4.1%) in Q1 2018, mobilisation declined significantly in Q1 2019 although the mobilisation interest rates were 0.5-0.7 percent per annum higher than the same period of 2018. The reason is due to the competition from other investment channels, in which the most notable one was the bond distribution channel through the banking system,” said SSI.
Thirdly, the bad debts in Q1 2019 showed signs of increase compared to the end of 2018 but the bad debt coverage saw improvement.
SSI’s information showed that the bad debt ratio and ratio of group 2 debts on total customer loans at the end of Q1 2019 was 1.72 percent and 1.59%, respectively, higher than the ratios of respectively 1.63 percent and 1.37 percent recorded in the end of 2018.
Of the six trillion dong of on-balance sheet bad debt increase in Q1 2019, 73 percent came from the Big three banks including VietinBank, Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) and Vietcombank (with respectively 2.445 trillion dong, 1.178 trillion dong and 737 billion dong of bad debts). However, since BIDV and Vietcombank maintained good credit growth, their bad debt ratios only increased by 0.05 percent compared to the end of 2018, while VietinBank’s soared from 1.56 percent to 1.85 percent due to the reduction of outstanding credit.
“The highlight is that the LLC ratio of most banks improved in Q1 2019 with average LLC increasing from 84.9 percent to 86.3%. In particular, banks with good LLC growth and LLC currently being more than 100 percent are Vietcombank, ACB, VietinBank and Bac A Commercial Joint Stock Bank (BacABank). Nevertheless, three banks still recorded LLC decline, including BIDV, MB and TPBank,” SSI mentioned.
The fourth notable point is that the good growth of service income, according to SSI, led to the increase in the proportion of service income in banks’ income structure. Statistics of SSI pointed out that the total operating income in Q1 2019 of banks reached nearly seven trillion dong, up by 48 percent compared to the same period of 2018, and its proportion in total income was 10.3%, higher than the 7.7 percent recorded in Q1 2019 and 10.1 percent recorded in the whole year 2018. Banks recording sharp rise in service income included BacABank, VIB, TPBank, MB and Saigon Hanoi Commercial Joint Stock Bank (SHB).
