Overall picture of banks’ NPL ratio

10-Nov-2017 Intellasia | Vietnam Finance | 6:00 AM Print This Post

As usual, Vietcombank still keeps the throne in terms of non-performing loan (NPL) ratio. The bank’s NPL ratio in balance sheet is only 1.15%, and there is no off-balance sheet bad debt as this year, the bank has acquired the entire bad debt from the Vietnam Asset Management Company (VAMC).

Along with Vietcombank, the giant Vietintbank is also available in the group of banks having low balance sheet NPL ratio at 1.21%. If including the bad debt at VAMC, the bank’s NPL ratio is still just 1.6%, much lower than the prescribed level of the State Bank at three percent.

The Military Bank (MB) continues to keep the reputation as a “clean bank” with NPL ratio in balance sheet at 1.35%. Although no latest data on bad debt at VAMC has been disclosed, it is estimated that MB’s both balance sheet and off-balance sheet NPL ratio is just more than two percent now.

Remarkably, Techcombank is present in the list of “clean banks”. In two recent years, this bank has emerged as a “hot spot” among commercial banks in terms of profit growth.

Right in the first nine months of this year, Techcombank’s pre-tax profit amounted to 4.840 trillion dong, up 69 percent year-on-year, higher than MB (although MB’s profit growth rate in the first nine months of this year was also very high, at 44%) and only “succumbed” to the trio Vietcombank, VietinBank, BIDV and the “emerging” VPBank.

Along with Vietcombank, Techcombank’s debt at VAMC has also been cleared. The bank’s NPL ratio now is just 1.93%. The bank is curbing credit when reducing 5.244 trillion dong outstanding credit after nine months, equal to the decrease of 3.7 percent compared to the beginning of the year, as a move to tightly control bad debt after two years of strong growth.

LienVietPostBank, a “new star” of the banking system, had the profit growth rate of 66 percent in the first nine months of the year and the total NPL ratio at 2.31%.

ACB and TBBank have overcome the “dark period” with the balance sheet NPL ratio to remain at very low level of 1.05 percent and 0.89%. If including the NPL ratio at VAMC, the NPL ratio is still less than two percent.

As for the “new comer” on Upcom i.e. Kienlongbank, despite low profits, which stood at only 153 billion dong in the first nine months of this year, its financial situation is healthy when both balance sheet and off-balance sheet NPL ratio is just 1.96%.

Considering balance sheet NPL ratio, VPBank and Sacombank are the only two banks that exceeded the State Bank’s ceiling of three percent, at 3.06 percent and 5.95 percent respectively. However, these two banks have basic differences.

VPBank has very strong performance in the consumer credit sector. Currently, the outstanding loans of the subsidiary company FE Credit accounts for as much as one fourth of the bank’s total outstanding loans, according to Q3/2017′s consolidated financial statement. Meanwhile, the bad debt ceiling of three percent is only applied to commercial banks.

For parent bank alone, VPBank’s balance sheet NPL ratio is 2.6%. However, if including the bad debt at VAMC, the ratio exceeds three percent, at 5.21%.

For Sacombank, the actual NPL ratio is much higher than 5.95%, and is expected at more than 20 percent if including the bad debt at VAMC.

NCB is the only bank among nine ailing banks to decide to self-restructure. So far, the bank’s balance sheet and off-balance sheet NPL still remains very high, at about 20%.

The current Saigon Commercial Bank (SCB) now is formed from the merger of three previous ailing banks including SCB, Ficombank and TinNghiaBank. The merger seemed to only increase the scale and offset the NPL ratio among three banks rather than created changes.

SCB’s NPL ratio if including bad debt at VAMC is rather high, about more than seven percent. That is not to mention huge potential debt in receivables and interest receivable.

Also related to ailing banks, Habubank, after merging into SHB, brought about large bad debt to this bank along with the internal resource strengthening. If including the bad debt at VAMC, SHB’s current NPL ratio is about 4.8%. The reason why SHB still let NPL ratio to exceed the ceiling of three percent was not only because the bank did not have enough potential to put for provision but because SHB was allowed to extend the provisioning period until 2024 under the merger scheme with Habubank.

In another case, the giant BIDV reported the pre-tax profit of 5.555 trillion dong in the first nine month of this year, down about 200 billion dong compared to the same period last year due to the strong increase in provision to handle the bad debt after the merger with MHB. With the current provision, BIDV is more likely to bring the balance sheet and off-balance sheet NPL ratio to less than three percent because this ratio is currently less than 3.5%.

VIB, in spite of being quite active in acquiring bad debt from VAMC, still has the total NPL ratio on Upcom at 3.83%.

Meanwhile, Eximbank still keeps the balance sheet NPL ratio at less than three percent but if including the NPL ratio at VAMC, this ratio is 7.08%.

Accrued interest, or more specifically, receivables and accrued interest, are normal financial items that any commercial bank has. However, many banks are taking advantage of these items to hide bad debt and report virtual interest.

SBV is a quite typical case. The bank’s total receivables and accrued interest is currently at the highest level in the banking sector in terms of both absolute and relative figures.

Regarding absolute figure, SCB’s scale of receivables and accrued interest now amounted to 64.906 trillion dong, up more than 8.3 trillion dong after nine months. In terms of relative value, receivables and accrued interest now make up 15.1 percent of SCB’s total assets.

Sacombank follows with 40.306 trillion dong receivables, representing 11.09 percent of the total assets. NCB comes after with receivables and accrued interest reckoning for as much as 9.43 percent of the total assets.

The abovementioned three banks own the total NPL ratio exceeding the three percent threshold prescribed by the State Bank, at about 20 percent for Sacombank and NCB, compared to more than seven percent for SCB. The unexpected growth of receivables and accrued interest is the signal showing that the bad debt situation of these three banks is even worse than balance sheet and off-sheet calculations.

In most other cases, the ratio of receivables and accrued interest on total assets stayed stable. Techcombank has the highest ratio of six percent.

As aforementioned, Techcombank’s debt at VAMC is now zero and the bank has rather low NPL ratio at 1.93%. Even when receivables and accrued interest of this bank has potential bad debt, if fully recording, it is highly likely that Techcombank’s actual NPL ratio is still less than three percent.


Category: Finance, Vietnam

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