Bad debt worries to ease thanks to high provision rate

VCN - As shown by a survey in 2021, the ratio of bad debts to total loans of 12 out of 27 surveyed banks has increased. However, the leaders of banks said that they had increased the bad debt coverage ratio to a record level in order to ease concerns over bad debt.
Directing cash flow to priority areas, preventing bad debts from increasing Directing cash flow to priority areas, preventing bad debts from increasing
Banks boost sales of mortgaged real estate to recover bad debts Banks boost sales of mortgaged real estate to recover bad debts
Banks' bad debt continues to increase Banks' bad debt continues to increase
Bad debt ratio in 2021 of 27 surveyed banks. Chart: H.Due
Bad debt ratio in 2021 of 27 surveyed banks. Chart: H.Due

Set aside risk provisions

According to the financial statements for 2021 of 28 banks listed on the stock market, VPBank currently has the highest bad debt ratio, with 4.47% of total outstanding loans, a sharp increase compared to 3.41% at the end of 2020. Next is VietBank with an increase of nearly double the previous year to 3.65%. Then, NCB, VIB and SHB maintain the ratio of 3%, 2.32% and 2.22%, respectively. The banks with the lowest bad debt ratio are MBBank with 0.64%, Vietcombank and Nam A Bank with 0.63%.

Among banks with a reduced bad debt ratio, Kien Long Bank is the most typical example when it dropped sharply from more than 5.42% to only 1.89% of total outstanding loans.

However, despite a sharp increase in their bad debt ratio, banks have also set up provisioning for risks. For example, by the end of 2021, MSB's bad debt ratio was at 1.15% of total outstanding loans. A representative of MSB said that the bank has conducted debt restructuring for customers affected by Covid-19 according to Circulars 01 and 14 of the State Bank (SBV) and has made adequate provision of up to VND1,567 billion, up 46% compared to 2020.

Similarly, in 2021, ACB set aside more than VND3,336 billion to make provision for credit risks, 3.5 times higher than the previous year, but still reported a 25% increase in pre- and after-tax profit, reaching more than VND11,998 billion and nearly VND9,603 billion. LienVietPostBank also spent more than VND1,322 billion to set up provisions for credit risks in 2021, 1.9 times higher than the previous year.

Meanwhile, TPBank's total bad debt (TPB) as of December 31, 2021 decreased by 19% compared to the beginning of the year, to only nearly VND1,157 billion, mainly thanks to the reduction of group 3 and group 5 debts. As a result, the ratio of bad debt on loan balances down to less than 1%. In 2021, TPBank still spent VND2,908 billion for credit risk provisions, an increase of 63% compared to 2020. In general, for the whole of 2021, ABBank spent nearly VND687 billion to make provisions for credit risks, up 34% from the previous year.

In the state-owned banking sector, BIDV has controlled and handled bad debts quite well over the years. Typically, BIDV has always made provisions for risks that have increased higher than profits. According to Mr. Phan Duc Tu, Chairman of BIDV's Board of Directors, by the end of 2021, this bank's bad debt had dropped sharply to 0.81%. Notably, the bad debt coverage ratio (balance of provision fund for credit risks/bad debt balance) reached 235%, the highest level in recent years and much higher than the set target.

Similarly, Mr. Nguyen Thanh Tung, Deputy General Director in charge of Vietcombank's Executive Board, said that the bad debt coverage ratio is up to 424%. In particular, all outstanding loans structured according to Circulars 03 and 14 of the State Bank have been fully set aside, two years earlier than the prescribed time limit.

VietinBank also raised the bad debt coverage ratio in 2021 to 171%, instead of 132% at the end of 2020. A representative of VietinBank said that in 2021, VietinBank controlled bad debts at a very low level. Thanks to a very careful assessment to come up with a safe scenario for 2022, VietinBank has sharply increased the bad debt coverage ratio.

Bad debt may decrease in 2022

According to leaders of many banks, compared to 2020, the banking industry has more experience in handling bad debts and controlling credit quality in 2021. This will be even better controlled in 2022, especially amid the gradual recovery of the economy.

According to a recent survey by the State Bank of Vietnam, the majority of surveyed credit institutions believe that bad debts of the whole system will drop slightly in the first quarter of 2022. As revealed by analysts of SSI Securities, in 2022, the risk for banks' bad debt is under the risk of being unable to be extended under the regulations in Circular 14. But even if this happens, the situation is not alarming thanks to the gradual recovery of the economy and higher debt repayment capacity of businesses. Besides, many banks have made 100% provision for structural debt. Credit risk is only possible with weak reserve buffer zones.

At the end of 2021, according to a representative of the State Bank of Vietnam, the bad debt ratio on the balance sheet in 2021 was 1.9%, an increase of 1.69% year on year. As a matter of fact, if other bad debts which were sold to the Asset Management Company of credit institutions (VAMC) but not yet resolved at the end of 2021 and other potential ones are included, this ratio is up to 3.79%. In addition, banks have also restructured many debts for pandemic-hit customers. Besides, other debts have been also restructured according to Circular 01, Circular 03, and Circular No. 14. In total, the overall bad debt ratio could be at 8.2%.

Therefore, despite many optimistic signals about the bad debt situation and asset quality of banks in 2022, especially with the proportion of provisions for credit risks, the banks still need full awareness.

During a meeting with the State Bank of Vietnam at the beginning of the Lunar New Year, Prime Minister Pham Minh Chinh requested the banking industry to drastically and effectively implement the restructuring of the system of credit institutions in association with bad debt settlement. This is a key task that has been a focus of the State Bank for many years.

Minh Chi/ Thu Phương

Related News

Shareholders expect the shareholder meeting season

Shareholders expect the shareholder meeting season

VCN - From mid-March to April this year, many banks have planned to organize their annual general meetings of shareholders (AGM). Accordingly, information about dividend distribution or profit targets always attracts the attention of shareholders, especially when many new plans are proposed this year.
Effectively implement the State

Effectively implement the State's credit capital investments to attract borrowers

VCN – Motivated by over VND 200,000 billion of the State’s credit capital investment poured into the economy, key economic projects have been implemented and achieved positive results. Therefore, removal of bottlenecks and obstacles will create more attraction and promote the role of the State's credit capital investments.
Credit and access to credit: A problem for banks and businesses

Credit and access to credit: A problem for banks and businesses

VCN - Since the beginning of the year until now, the Prime Minister, the Government and the State Bank (SBV) have continuously issued instructions to promote credit, but the situation of banks having excess cash and businesses lacking capital is still a concern of the economy.
Good management of public debt creates room to implement expansionary fiscal policy

Good management of public debt creates room to implement expansionary fiscal policy

VCN - Public debt safety indicators continue to be strictly controlled in the safe limit. With a lower debt level than the current ceiling rate, and a favorable debt structure, Vietnam has a lot of room to implement expansionary fiscal policy to allocate loans for large projects as an economic growth engine.

Latest News

Import turnover of 19 commodity groups grows over 20%

Import turnover of 19 commodity groups grows over 20%

VCN – Most of major import commodity groups have high growth turnover compared to the same period in 2023.
Vietnam owns significant advantages in attracting FDI

Vietnam owns significant advantages in attracting FDI

VCN - In an interview with Customs News, Dr. Vo Tri Thanh, Director of the Institute of Branding and Competition Strategy, believed that the global minimum tax could affect global foreign direct investment (FDI) flows and the FDI attraction policies of each country. However, "in crisis lies opportunity", Vietnam still has significant advantages in attracting FDI.
Nearly 7,000 tariff lines of AKFTA product specific rules need to be transposed

Nearly 7,000 tariff lines of AKFTA product specific rules need to be transposed

VCN - ASEAN member states and the Republic of Korea (RoK) reached a consensus on the transposition of ASEAN-RoK Free Trade Agreement (AKFTA) Product Specific Rules from the Harmonised System Codes HS 2017 to HS 2022.
Vietnam needs to cook up stronger global rice brand

Vietnam needs to cook up stronger global rice brand

Although Vietnamese rice has a foothold in several fastidious markets, there is a long way to go to make it a stronger brand globally, according to insiders.

More News

Vietnam advised to fully tap CPTPP to boost exports to Canada

Vietnam advised to fully tap CPTPP to boost exports to Canada

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has opened up numerous opportunities for Vietnam and Canada to boost two-way trade, however, tax initiatives under the trade pact have not been tapped to the fullest extent by the Vietnamese exporters, said Vietnamese Trade Counsellor in Canada Tran Thu Quynh.
ASEAN, RoK agree on transposition of AKFTA product specific rules

ASEAN, RoK agree on transposition of AKFTA product specific rules

ASEAN member states and the Republic of Korea (RoK) have reached a consensus on the transposition of ASEAN-RoK Free Trade Agreement (AKFTA) Product Specific Rules from the Harmonised System Codes HS 2017 to HS 2022.
Opportunities for digital technology businesses to go global

Opportunities for digital technology businesses to go global

Finding solutions and directions to promote and develop Vietnamese digital technology enterprises is an important task, which will promote the stability and sustainability of the country's economy, heard a recent conference.
Vietnam, China eye stronger border trade

Vietnam, China eye stronger border trade

Border provinces of Vietnam and China should continue close coordination and enhance trade promotion between the two sides, stressed the recent talks between the management boards of the economic zone of the northern province of Ha Giang and the Malypo border economic cooperation zone of China’s Yunnan province.
Improve competitiveness and sustainable development of the seafood industry

Improve competitiveness and sustainable development of the seafood industry

VCN - In early 2024, seafood exports have prospered. This is the driving force that helps seafood businesses hope for a stronger recovery this year. Ms. Nguyen Thi Thu Sac, Chairwoman of the Vietnam Association of Seafood Exporters and Producers (VASEP) shared with Customs Magazine.
Business environment reform needs further promotion: expert

Business environment reform needs further promotion: expert

Resolution 02 issued by the Government creates pressure for the ministries, sectors and localities to make changes for the business community as well as the socio-economic development.
Singapore is the largest foreign investor in VN in Q1

Singapore is the largest foreign investor in VN in Q1

The disbursed FDI rose by 7.1 per cent in the first quarter to reach $4.63 billion, a signal that the disbursement will continue the positive trend, the agency said.
Thai Binh boosts investment, trade cooperation with Germany

Thai Binh boosts investment, trade cooperation with Germany

A delegation from the northern province of Thai Binh, led by Deputy Secretary of the provincial Party Committee Nguyen Khac Than, visited several localities and business organisations in Germany from March 25 to 27, in a bid to enhance trade cooperation with and attract direct investment from the European nation.
Lifting obstacles to develop industrial parks

Lifting obstacles to develop industrial parks

VCN - Attracting investment and developing industrial zones (IZs) and economic zones (EZs) is one of the important contents to implement the policy of developing a multi-component, open, attract investment and resources from all economic sectors to develop the country. In addition to the results achieved, there still limitations that need to be removed to draw investments to develop industrial parks and economic zones, including financial problems for industrial parks.
Read More

Your care

Latest Most read
Import turnover of 19 commodity groups grows over 20%

Import turnover of 19 commodity groups grows over 20%

VCN - According to the General Department of Vietnam Customs, in the first two months of 2024, the total import turnover of the country increased by 17.1% year-on-year to US$ 54.21 billion. The result is only lower than the record increase of the same per
Vietnam owns significant advantages in attracting FDI

Vietnam owns significant advantages in attracting FDI

VCN - Vietnam's economy has passed the most dangerous and difficult period and is now more stable. Inflation, exchange rates, and interest rates have decreased, bank liquidity has stabilized, and the stock and bond markets have experienced shocks and begu
Nearly 7,000 tariff lines of AKFTA product specific rules need to be transposed

Nearly 7,000 tariff lines of AKFTA product specific rules need to be transposed

ASEAN member states and the Republic of Korea (RoK) reached a consensus on the transposition of ASEAN-RoK Free Trade Agreement (AKFTA) Product Specific Rules
Vietnam needs to cook up stronger global rice brand

Vietnam needs to cook up stronger global rice brand

Although Vietnamese rice has a foothold in several fastidious markets, there is a long way to go to make it a stronger brand globally, according to insiders.
Vietnam advised to fully tap CPTPP to boost exports to Canada

Vietnam advised to fully tap CPTPP to boost exports to Canada

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has opened up numerous opportunities for Vietnam and Canada to boost two-way trade, however, tax initiatives under the trade pact have not been tapped to the fullest extent by the Vietnamese exporters, said Vietnamese Trade Counsellor in Canada Tran Thu Quynh.
Mobile Version