(DTCK) Credit in the first six months of the banking industry increased slowly, in which many banks had not escaped from growing bad debt, but the non-performing loan ratio (NPL) showed signs of increase due to the impact of Covid-19 epidemic.
Specifically, although the credit growth was negative 2.79%, the NPL of Saigon Bank for Industry and Trade (Saigonbank) by June 30 was 321 billion dong, increased by 39 billion dong from the beginning of the year. The NPL ratio rose from 1.94 percent to 2.27%.
Regarding the loan quality, the total bad debt of Tien Phong Commercial Joint Stock Bank (TPBank) by the end of June 2020 grew by 20 percent compared to the beginning of this year, making the bad debt ratio increase from 1.29 percent to 1.47%.
In which, sub-prime debts (group-three debt) and doubtful debts (group-four debt) increased by 47 percent and 22 percent respectively. Particularly, debts likely to lose capital (group-five debts) decreased.
At Kien Long Commercial Joint Stock Bank (Kienlongbank), the loan quality and total bad debts by the end of Q2/2020 were 6.6 times higher than the beginning of the year, rising to 2.25 trillion dong. In particular, the debt likely to lose capital (group five) was nine times higher than the beginning of the year, recording nearly 2.146 trillion dong.
According to the explanation of Kienlongbank, among the balance that were likely to be lost, there was 1.896 trillion dong of loans outstanding to a group of customers with collaterals being stocks of another bank classified as group-five loans under Decision 2595/QD-NHNN of the State Bank of Vietnam (SBV). As a result, the ratio of bad debts to balance of Kienlongbank increased sharply from 1.02 percent to 6.59%.
On-June bad debt at June 30 of Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) was 6.682 trillion dong, up nearly 950 billion dong from the beginning of the year (nearly 17%). In particular, group-three debt increased sharply by 185 percent to 851 billion dong. The NPL ratio increased from 1.94 percent to 2.15%.
Regarding loan quality, Vietnam Thuong Tin Commercial Joint Stock Bank (Vietbank)’s total bad debt by the end of June 2020 increased by 50 percent compared to the beginning of the year, recording nearly 807 billion dong. In which, sub-prime debts (group three) increased by 72%, debts with possible loss of capital (group five) increased by 51%. As a result, the NPL ratio on outstanding loans of VBB increased from 1.32 percent at the beginning of the year to 1.88%.
In Q2/2020, VietBank had to make more than 11 billion dong of provision for credit losses, while the same period was reversed more than 2 billion dong. As a result, profit before and after tax in Q2 plummeted by 61 percent over the same period, to only 58 billion dong and 46 billion dong.
Accumulated in the first six months of 2020, profit before and after tax of VietBank only increased 16 percent compared to the same period last year, reaching nearly 288 billion dong and 229 billion dong.
NPL also grew at large banks, due to the impact of Covid-19 epidemic. Specifically, the consolidated financial statements for Q2 showed that Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)’s total NPL by the end of Q2 increased by 11 percent compared to the beginning of the year, making the NPL ratio on outstanding loans increased from 0.79 percent to 0,83%. In particular, the sub-prime debt increased by 58 percent and doubtful debt increased by 56 percent compared to the beginning of the year.
As of June 30, 2020, Asia Commercial Joint Stock Bank (ACB)’s bad debt was 1.918 trillion dong, up by 32 percent year-on-year (YoY). The ratio of bad debts to total outstanding loans increased from 0.54 percent to 0.68%.
Vietnam Export Import Commercial Joint Stock Bank (Eximbank)’s bad debt as of March 31, 2020 rose by four percent compared to the beginning of this year, recording nearly 2.018 trillion dong, mainly due to an increase in substandard debt (up 6%) and doubtful debt (up 25%). As a result, the NPL ratio on the bank’s balance increased to 1.85 percent compared to 1.71 percent at the beginning of the year
Regarding the business plan for 2020, Eximbank expected profit before tax and additional provision for Vietnam Asset Management Company (VAMC) bond settlement to reach 1.918 trillion dong. In which, profit before tax was 1.318 trillion dong, up 20 percent compared to 2019.
Eximbank would also focus on handling debts sold to VAMC, aiming to repurchase all debts sold to VAMC by 2020 in line with the bank restructuring orientation of SBV.
Meanwhile, there were still some declining cases like Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) and Southeast Asia Commercial Joint Stock Bank (SeABank).
Specifically, by the end of June 2020, VPBank’s total bad debt decreased by two percent compared to the beginning of the year, causing the bad debt ratio to decrease from 3.42 percent to 3.19%. The sub-standard debt (debt of group three) declined by 11 percent and the possibility of loss of capital (debt of group 5) decreased by 10%. In contrast, the doubtful debts (group-four debt) increased by 47%.
Similarly, the total bad debt of SeABank in the first six months of 2020 decreased by four percent compared to the beginning of the year, to only 2.19 trillion dong. In particular, the sub-prime debt (group three) decreased by 10%, the doubtful debt (group four) decreased by 42%, while debt likely to lose capital (group five) increased by 24%.
As a result, the NPL ratio on outstanding loans of SeABank decreased from 2.31 percent at the beginning of the year to 2.23%.
Increasing bad debt was unavoidable
Before the impact of Covid-19 epidemic, SBV soon issued Circular 01/2020/TT-NHNN to allow banks to restructure and extend debts to customers.
In other words, banks were allowed to let customers extend the repayment period until the end of September 2020. Therefore, judgments made by economic experts finance, bad debt of banks were expected to increase due to the impact of the disease, but so far had not reflected all.
Credit in 2020 was assessed to be difficult to increase at a high level, but bad debts were warned to rise because of the impact of Covid-19 epidemic, affecting production and business activities of enterprises, leading to unability to repay debts on time.
However, according to Tran Du Lich, a member of the National Financial and Monetary Policy Advisory Council, in the context of an epidemic market, rising bad debt was unavoidable, but which should be accepted at an appropriate level instead of the problem of high bad debt as before.
In fact, in the context of the Covid-19 epidemic affecting the production and business activities of enterprises, SBV also forecasted that the industry’s bad debt would go up to be controlled at three percent to four percent this year.
However, some economic and financial experts said that this was not only the effort of the banking sector to restructure debt but also an opportunity to restructure the economy for the system of enterprises, so that banks would have a more complete view of financial capacity, sources of debt repayment, proliferate debt of companies.
