Banks bad debt tends to increase

VCN - The financial statements of the second quarter and the first six months of 2022 from many banks have revealed not very positive developments in credit quality when credit increased sharply, but the bad debt ratio was also pushed up compared to the end of 2021.
Bad debts also increased when many debts that were restructured were changed into debt groups. Source: Internet.
Bad debts also increased when many debts that were restructured were changed into debt groups. Source: Internet.

Debt quality goes down

The strongest increase in the system so far is NCB. NCB's consolidated financial statements recorded that the ratio of bad debt to total outstanding loans jumped from 3% at the beginning of the year to 11% at the end of June 2022.

In which, debt groups all increased sharply, sub-standard debt increased by 90% from more than VND600 billion to nearly VND1,144 billion, and debt group 3 increased 15 times compared to the beginning of the year, from VND181 billion to VND2,626 billion. The worst debt group is debt group 5 - debt that is likely to lose capital also increased by more than 140% to VND1,130 billion.

Next is VPBank when the total bad debt by the end of June increased by 27% compared to the beginning of the year, to more than VND20,600 billion, making the ratio of bad debt to total outstanding loans increase to 5.25% compared to 4.47%.

In which, VPBank's debt with the possibility of losing capital increased by more than 240%, and doubtful debt also increased by 20%.

LienVietPostBank's financial report also shows that, compared to the end of 2021, the bank's total bad debt increased by 11.2% to nearly VND3,183 billion, of which group 3 debt increased by 67.5%, group 5 debt also increased by 37.8%. The ratio of bad debt to total outstanding loans of the bank increased from 1.37% to 1.4%.

At MB, customer loans increased sharply by 14.1%, among the highest in the whole system, helping pre-tax profit to reach more than VND11,896 billion, up 49% over the same period last year. However, credit quality tended to worsen as the ratio of bad debt to total outstanding loans increased to 1.2% compared to 0.9% at the beginning of the year. Notably, debt with the potential to lose capital increased the most by 123% from nearly VND820 billion to VND1,826 billion, debt in groups 3 and 4 also increased slightly compared to the figure by the end of 2021.

For TPBank, TPBank's total bad debt at the end of the second quarter of 2022 was VND1,285 billion, up 11% compared to the beginning of the year. In which, debt with the possibility of losing capital increased to 51%. As a result, TPBank's bad debt-to-loan ratio increased slightly from 0.82% to 0.85%.

According to BIDV's Q2 financial report, the bank's asset growth and profit growth were positive, but debt quality tended to be worse. The ratio of bad debt to total outstanding loans after 6 months of 2022 has increased to 1.02%, compared to 0.99% at the end of 2021. In which, the number of group 5 debts (debts likely to lose capital) increased. 18%, group 3 debt (substandard debt) increased sharply by nearly 47%, and only group 4 debt (doubtful debt) decreased by nearly 30%.

Bad debt ratio at some banks. Sketched by: H.Due
Bad debt ratio at some banks. Sketched by: H.Due

According to the financial statements, some banks still recorded the ratio of bad debt to total outstanding loans flat, even down compared to the first quarter of 2022, but in terms of the number of bad debt groups, especially those that can capital loss is recorded as an increase.

For example, so far, Techcombank is a bank that has controlled the quality of bad debts, almost standing still or decreasing slightly in the previous quarters, so in the first half of this year, this bank also recorded a flat bad debt ratio at 0.6% of total outstanding loans. However, Techcombank's total debt in group 3,4,5 in the first 6 months of the year increased by 2.85% compared to the end of 2021, with group 5 debt increasing by 27%.

With this development, at VIB, by the end of the second quarter, the bad debt ratio accounted for 1.74% of total outstanding loans, lower than 1.75% at the beginning of the year. But VIB's doubtful debt and potentially loss-making debt increased by 32% and 67%, respectively. The ratio of bad debt to total outstanding loans of ABBank also decreased slightly from 2.34% at the beginning of the year to 2.3%, but group 5 debt increased by 20% compared to the beginning of the year and accounted for 58% of total bad debts, total absolute loan balance increased by 10.7%. BacABank also had a bad debt ratio decrease from 0.77% to 0.72% after 6 months of 2022, although group 3 debt decreased, group 5 debt was flat, but group 4 debt was more than 35%.

Bad debt continues to increase

In fact, from the beginning of the year, experts have given many warnings that the bad debt ratio at banks may increase sharply because banks have had to stop debt restructuring for businesses affected by Covid-19 since June 30.

In a report on banking conducted by Vietnam Report Joint Stock Company (Vietnam Report), many experts participating in the survey said that bad debt tends to increase quite strongly when the influence of the pandemic on the bank's balance sheet is forecast to continue for a long time because businesses have not been able to recover and the debts after being facilitated for restructuring are ranked in groups 1 and 2, but still unable to improve will force the system to officially record as bad debt, especially after Circular 14 expires on June 30, 2022.

In this regard, Nguyen Quoc Hung, General Secretary of the Banking Association emphasized that millions of billions of VND of credit were affected by the pandemic, but the structural debt was only about VND300,000 billion. In fact, the risk of bad debt of banks is much higher than the data in the accounting books, so banks are facing more clearly bad debts.

With these statements, the survey results of the Vietnam Report show that 45.5% of banks expect to continue to increase provision for risk, 36.4% of banks maintain provision levels as in the previous year and only 18.2% reduced provision for risk.

Therefore, many banks have sharply increased the ratio of bad debt coverage, such as Vietcombank with the highest ratio up to 506%, BIDV with 279%, Techcombank with 171.6%, ACB with 185%. But there are also banks that have sharply reduced provisioning, such as ABBank down 32% over the same period, BacABank down 2%, and MB down 17%.

By Huong Diu/ Huu Tuc

Related News

Continue to handle cross-ownership in banks

Continue to handle cross-ownership in banks

VCN - The situation of excess share ownership, cross-ownership between credit institutions (CIs), CIs and enterprises, although has decreased significantly compared to previous periods, is still complicated and requires continued inspection and control.
More efficient thanks to centralized payments between the State Treasury and banks

More efficient thanks to centralized payments between the State Treasury and banks

VCN - The State Treasury (KBNN) is continuing to maintain the stable operation of payment systems within the KBNN system and payments with banking systems to ensure smooth, timely and safe operations.
Allocating credit room, motivation for banks to compete

Allocating credit room, motivation for banks to compete

VCN - The State Bank of Vietnam (SBV) has announced that it will allocate the credit growth limit (room) for banks that have achieved 80% of their target. This is an incentive for banks to increase their competitiveness.
Banks minimize costs, optimize profits

Banks minimize costs, optimize profits

VCN - In the first months of the year, banks' ability to optimize costs has improved significantly, especially when many banks have actively transformed digitally and cut costs in the context of a difficult economy.

Latest News

Banks increase non-interest revenue

Banks increase non-interest revenue

VCN - Slow credit demand and fierce competition have forced banks to seek ways to increase non-interest revenue, especially when there is a lot of support from the digital transformation of the entire banking system.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.
Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN – In order to achieve goal of strictly managing public debt and maintaining security and safety of the national financial system in 2025, it is necessary to ensure the borrowings and repayments of public debts is within the approved estimate; closely monitor public debt indicators to ensure that they are within the ceiling and warning thresholds approved by the National Assembly.

More News

Revising the title of a draft of 1 Law amending seven finance-related laws

Revising the title of a draft of 1 Law amending seven finance-related laws

VCN - On November 19, 2024, the Standing Committee of the National Assembly (SCNA) discussed amendments and refinements to the draft of a law revising seven existing finance-related laws. Concluding the session, Vice Chairman of the National Assembly Nguyen Duc Hai emphasized the need for the Government to direct the drafting body and relevant agencies to collaborate closely to finalize a persuasive and widely supported report, ensuring the quality of the draft law for the National Assembly's consideration and decision.
Transparency evates the standing of listed companies

Transparency evates the standing of listed companies

VCN - According to the Hanoi Stock Exchange (HNX), the number of companies placed under warning, control, or restricted trading on the listed and registered markets has increased over the past two years compared to 2022.
State-owned securities company trails competitors

State-owned securities company trails competitors

Contrary to the outstanding performances in the banking sector, the securities subsidiaries of major banks have yet to fully leverage their potential, despite numerous inherent advantages.
Strengthening the financial “health” of state-owned enterprises

Strengthening the financial “health” of state-owned enterprises

VCN - The state economy plays a key role in the socio-economic development process, but it is necessary to strengthen the financial health and competitiveness of state-owned enterprises (SOEs).
U.S. Treasury continues to affirm Vietnam does not manipulate currency

U.S. Treasury continues to affirm Vietnam does not manipulate currency

VCN - In its latest report, the U.S. Department of the Treasury has positively assessed Vietnam's monetary policy, reaffirming that Vietnam does not engage in currency manipulation.
Exchange rate fluctuations bring huge profits to many banks

Exchange rate fluctuations bring huge profits to many banks

Net profits from the foreign exchange trading segment of many banks have gained positive results thanks to a strong USD/VNĐ exchange rate fluctuations this year.
A “picture” of bank profits in the first nine months of 2024

A “picture” of bank profits in the first nine months of 2024

VCN - Pre-tax profits for banks during the first nine months of 2024 remained positive, exceeding 200 trillion VND, solidifying the sector's position as a market leader.
Many challenges in restructuring public finance

Many challenges in restructuring public finance

VCN - Restructuring public finance is an important step to improve state financial management, ensure resources are allocated reasonably and effectively, contributing to the country's sustainable development. In addition to the achieved results, the process of accelerating public finance restructuring also faces many pressures.
Tax declaration and payment by e-commerce platforms reduces declaration points and compliance costs

Tax declaration and payment by e-commerce platforms reduces declaration points and compliance costs

VCN - E-commerce platforms that declare and pay taxes on behalf of traders not only help to reduce the number of tax declaration points but also reduce the cost of compliance with administrative procedures for the whole society because only one point as the e-commerce trading platform implements tax deduction, payment and declaration on behalf of tens, hundreds of thousands of individuals and business households on the platform.
Read More

Your care

Latest Most read
Banks increase non-interest revenue

Banks increase non-interest revenue

VCN - In the first 9 months of 2024, the group of banks leading in profit has focused on increasing the ratio of non-term deposits (CASA) to help reduce operating costs, resulting in positive credit growth.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.
Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN - According to the plan for borrowing and repaying public debt and foreign debt of the country in 2025, the total borrowing demand of the Government in the year is expected to be at VND 815,238 billion, an increase of 20.6% compared to the Government'
Revising the title of a draft of 1 Law amending seven finance-related laws

Revising the title of a draft of 1 Law amending seven finance-related laws

On November 19, 2024, the Standing Committee of the National Assembly (SCNA) discussed amendments and refinements to the draft of a law revising seven existing finance-related laws.
Mobile Version