Affected by the Covid-19 epidemic, February credit balance decreases

27-Feb-2020 Intellasia | Dau tu Chung khoan | 6:02 AM Print This Post

Talking to the Securities Investment Review Newspaper, senior leaders of the Credit Department of Economic sectors, the State Bank of Vietnam (SBV) said, as of February 7, 2020, the credit balance of the whole economy had a decrease of 0.38 percent compared to the end of 2019 and a decrease of 0.47 percent compared to the end of the previous month.

Fields of sharp decline such as processingmanufacturing accounted for 16.48 percent of the Gross Domestic Product (GDP) and 14.52 percent of the total balance of the economy; agricultureforestryfishery accounted for 13.96 percent of GDP and 8.74 percent of the total loans.

Along with that, many expected sectors were also strongly affected, such as food processing, beverages, textiles and footwear, tourism, trade, and so on.

The preliminary report of banks sent to SBV showed that the total balance could be reduced by about 900 trillion dong due to the Covid-19 influenza epidemic, particularly the number in the banking sector with state capital was nearly 600 trillion dong leading to overdue debt, potential bad debt increase, said the leader.

The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) Training and Research Institute said that the impact of the disease on the banking system was mainly through the impact on production and business activities of businesses, customers, and the bank itself.

For the banking sector, the Covid-19 epidemic was expected to impact on some important aspects, such as credit demand reduction due to lower credit demand of businesses and households, especially in the first two quarters of the year; potential bad debt increase when businesses, households were negatively affected by the epidemic, leading to difficulties in production and business activities.

Sharing with the reporter, a senior leader of the Supervisory Inspection Agency (SBV), said that the disease situation, in the long run, would have a strong impact on the handling of old bad debts, while new bad debts arising would happen when businesses delayed production and business activities.

Meanwhile, 2020 was the last year to carry out and finalise the Project of Restructuring the system of credit institutions associated with dealing with bad debts in the 2016-2020 period to prepare for the banking sector’s strategy by 2025.

Despite concerns, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)’s leader said that the bank had not yet received a detailed report from businesses on the reduction of revenue due to the disease.

The reason was that the business had just started to return to production and business, and the production period in one month did not have enough data to report. In fact, businesses often needed three to six months to get a report on the specific productivity and business situation.

Specific data was not available yet, and still, an estimate for the bank to be ready for supporting measures such as rescheduling, rescheduling, excluding overdue penalties, and interest rates for balance, Vietcombank’s leader said.

Le Xuan Nghia, an economist, said that it was still too early to say that bad debt would increase sharply in 2020 due to the impact of the epidemic. All activities might slow down at present, but after the epidemic ended, the growth factors would recover very quickly. Because the Covid-19 epidemic was only a short-term risk, when it ended, people would promote shopping, consumption, travel, and so on.

Agreeing, the general manager of a joint-stock commercial bank said that the current situation was quite difficult for businesses and banks.

People deposited their savings in a congested bank, while businesses did not borrow business capital, which meant the bank was unprofitable. However, when the situation became better, businesses would often grow strongly, sales would double, even triple. Evaluating the impact of the Covid-19 flu on the banking sector, SSI Securities Corporation said that due to the macroeconomy in general and some fields, such as tourism, hotel, agricultural product export, etc., were affected by the epidemic, the banking industry would also be negatively affected in the short term.

However, given the long-term prospects of the industry and the current attractive valuation of bank stocks in Vietnam, a positive outlook for this sector in 2020 still maintained.

Banks should be aware of the epidemic situation impacting on bad debt, especially when the financial statements of banks in 2019 showed that the bad debt increased gradually over each quarter.

The trend of bad debt coming back in 2020 was existing, especially the real estate loan balance was still high, about 1.5 quadrillion dong, accounting for over 19 percent of the total loan balance, Nguyen Tri Hieu, an economist, warned.


Category: Finance, Vietnam

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