Bad debts increase sharply in many banks

28-Oct-2020 Intellasia | Tri Thuc Tre | 6:02 AM Print This Post

Fourteen out of 16 banks have announced their third quarter (Q3) 2020 financial statements. All of them recorded an increase in bad debts in the first nine months of the year, including major banks such as Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Military Commercial Joint Stock Bank (MBBank), Asia Commercial Joint Stock Bank (ACB) and Vietnam Prosperity Commercial Joint Stock Bank.

Statistics gathered from16 banks’ Q3 financial statements showed that the on-balance sheet bad debts by the end of September were more than 49.6 trillion dong, up by nearly 12 trillion dong compared to the beginning of the year, equivalent to an increase of 31%.

Only two out of 16 banks recorded bad debt reduction, including Southeast Asia Commercial Joint Stock Bank (SeABank) and National Citizen Commercial Joint Stock Bank (NCB). Specifically, the on-balance sheet bad debts of NCB by the end of September were 720 billion dong, down by 10 billion dong compared to the beginning of the year, helping the bank’s ratio of bad debts (on total outstanding loans) decline from 1.93 percent to 1.8%. In SeABank, the bad debts by the end of September were 2.184 trillion dong, down by 96 billion dong compared to the beginning of the year, bringing the bad debt ratio down from 2.31 percent to 2.23%.

Meanwhile, the remaining 14 banks all saw bad debt rise in the first three quarters (by more than 50 percent in some banks). The on-balance sheet bad debts of ACB as of September 30th 2020 were 2.480 trillion dong, up by 71 percent compared to the beginning of the year, in which the debt group 3 (sub-prime debts) rose by 3.5 times to 830 billion dong. The ratio of bad debts on total outstanding loans of ACB, hence, increased from 0.54 percent to 0.84%.

The bad debts of Vietcombank in the first nine months of 2020 also grew by more than two trillion dong, equivalent to an increase of 36 percent to 7.885 trillion dong. In particular, the debt group 3 and 4 sharply increased by 4.2 times and 2.7 times, respectively. The bank’s bad debt ratio increased from 0.79 percent in late 2019 to 1.01%.

In Sacombank, the on-balance sheet bad debts increased by 19 percent to 6.837 trillion dong. Meanwhile, the bank still has tens of trillion dong at Vietnam Asset Management Company (VAMC).

The on-balance sheet bad debts by the end of September at the consolidated VPBank (including its subsidiary) were 10.147 trillion dong, up by 15.3 percent compared to the beginning of the year. accordingly, the bank’s ratio of bad debts on total lending to customers increased from 3.42 percent to 3.65%. In particular, the bad debts of the parent bank VPBank was 5.690 trillion dong, accounting for 2.71 percent of the total outstanding loans, slightly up compared to the 2.69 percent recorded at the beginning of the year. If based on the total outstanding loans (including corporate bonds), the separate bad debt ratio of VPBank was only 2.1%.

The bad debts of the consolidated MBBank also increased from more than 1.1 trillion dong to 4.036 trillion dong, causing the bank’s bad debt ratio to increase from 1.16 percent to 1.5%.

Many small banks and medium-scaled banks also saw bad debt increase. The special case is Kien Long Commercial Joint Stock Bank (Kienlongbank) with bad debt rise of 6.5 times compared to the beginning of the year to 2.241 trillion dong. accordingly, the bank’s bad debt ratio jumped from 1.02 percent to 6.63%. the reason is that in early 2020, the bank recorded nearly 1.8 trillion dong of outstanding loans of a group of customers in the debt group 5 under the decision of the State Bank of Vietnam (SBV). These loans were secured by 176 million STB shares of Sacombank and Kienlongbank is striving to sell these shares to bring the bad debt ratio down to a low level.

The bad debts also increased sharply by 61 percent in another small-scaled bank Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank), reaching 867 billion dong. the bad debt ratio of the bank rose from 1.32 percent to 2.03%.

At Tien Phong Commercial Joint Stock Bank (TPBank), the bad debt soared by 59 percent to 1.971 trillion dong, accounting for 1.79 percent of the total outstanding loans. The bad debts of Maritime Commercial Joint Stock Bank (MSB) increased by 31 percent to 1.703 trillion dong, accounting for 2.32 percent of the total outstanding loans.

Although bad debts tend to rise, most banks still well control bad debts according to regulations. According to the SBV, by the end of August 2020, the on-balance sheet bad debt ratio of the entire banking system continued to be maintained below two percent.

However, according to experts, the pressure for banks in the near future is very high when Circular 01 regulating the structure of repayment period will sooner or later expire. Dr Phan Minh Ngoc, banking and financial expert said that “even if Circular 01 is amended one or more times, it will surely come to a time when there is no reason to amend the Circular and we let it expire. At that time, the bad debts must rise at a much higher level compared to the “rosy numbers” reported previously. Banks, at this time, will have to face a huge bad debt volume.”

Meanwhile, Dr Can Van Luc said that the on-balance sheet bad debt ratio may reach three percent by the end of 2020 and four percent in 2021.

While having to prepare to cope with new bad debts that may boom in the future, banks are also struggling with the sale, auction of secured assets, etc. to recover debts and handle existing bad debts. Numerous of property auctions still fell into a slump, although these real estate assets are located in prime locations and banks have continuously had to lower the starting prices. In addition, problems related to the coordination of implementation and guidance from ministries, industries and localities still exist, causing banks to face many difficulties in seizing secured assets.

 

Category: Finance, Vietnam

Print This Post

Leave a Reply

You must be logged in to post a comment.