Overview of bad debts in 26 banks in Q1/2021

15-May-2021 Intellasia | Doanh nghiep va Tiep thi | 5:02 AM Print This Post

Statistics from the consolidated financial statements of 26 banks showed that in the first quarter (Q1) of 2021, the total on-balance sheet bad debts of these banks increased by 5.3 percent to more than 93.2 trillion dong. In particular, Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) are still the banks with the largest amount of bad debts in the system, with respectively more than 21.7 trillion dong, 10.4 trillion dong and 8.9 trillion dong.

In Q1/2021, 20 out of 26 banks experienced increase in outstanding bad debts, even reaching more than 30 percent in some banks such as Asia Commercial Joint Stock Bank (ACB), Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), etc.

ACB recorded the strongest increase in bad debts of 61 percent in the first three months of 2021, reaching 2.954 trillion dong. In the recent analysis report, Saigon Securities Incorporation Research (SSI Research) said that ACB has actively re-classified the debts of a large corporate customer that may face difficulties in the future. In addition, ACB also forecast that it may take more than two years to handle the related secured assets. Therefore, the bank has made full risk provisions for this loan (assuming secured asset value is zero).

Vietcombank also recorded a sharp rise of 47 percent in bad debts in Q1/2021 (reaching 7.697 trillion dong). the bad debts of Military Commercial Joint Stock Bank (MB) grew by 29 percent to 4.185 trillion dong.

Meanwhile, six banks saw decline in bad debts, including VietinBank, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Southeast Asia Commercial Joint Stock Bank (SeABank), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Bac A Commercial Joint Stock Bank (BacABank), and Kien Long Commercial Joint Stock Bank (Kienlongbank).

In particular, Kienlongbank posted the strongest bad debt reduction from 1.883 trillion dong to 560 billion dong. It is known that the reason is because the bank finished selling STB shares of Sacombank the secured asset for the borrowing of a group of customers which was recorded in the group 5 debts in the end of 2019.

The five remaining banks had a slight decrease in bad debts, such as Techcombank (down by 12%), VietinBank (down by six percent), Sacombank (down by eight percent), SeABank (down by one percent), and BacABank (down by four percent).

Regarding the ratio of bad debts on total outstanding loans, 11 out of 26 banks recorded decrease in bad debt ratio compared to the end of 2020. In which, some banks saw bad debt ratio decrease due to the very low growth in outstanding credit in Q1/2021, partly because of the seasonal factor and partly because of the low credit demand of the economy.

Six banks currently have bad debt ratio of less than one percent. Of these banks, some have lowered their bad debt ratio to record low levels.

Techcombank currently has the lowest bad debt ratio in the system. The on-balance sheet bad debts of the bank only account for 0.38 percent of the total outstanding credit, less than the 0.47 percent compared to the beginning of the year. The bank said that it has actively used provisions for risks to help significantly lower bad debt ratio, at the same time raised the bad debt coverage ratio to 219%.

Five other banks have bad debt ratio of less than one percent, including Nam A Commercial Joint Stock Bank (0.95%), ACB (0.92%), Vietcombank (0.88%), VietinBank (0.88%) and BacABank (0.79%).

Overall, the picture of bad debts in Q1/2021 seems to be even better than the end of 2020, despite many previous forecasts that bad debts would burst in 2021.

Nevertheless, these are only the on-balance sheet bad debt figures that are easily found on banks’ balance sheets. Meanwhile, the potential bad debts from the restructured debt balance has not been clearly shown.

In the recent analysis report, HSBC also noted that although the bad debts shown in the balance sheet of Vietnamese banks only increased slightly in 2020, it is advisable to pay attention to the systematic risk of bad debts which is on the rise. If including the “impaired loans”, the bad debts is estimated to increase from less than five percent in 2019 to seven percent in 2020. HSBC also explains that impaired loans as the broad definition of bad debts, which also include the debt sold to VAMC and debts restructured under Decision 780.

 

Category: Finance, Vietnam

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