According to Nguoi Dong Hanh Newspaper, the bad debt of 20 out of 25 surveyed banks increased after the first half of 2020. In which, Kien Long Commercial Joint Stock Bank (Kienlongbank) ‘s bad debt increased by 5.5 times, to 2.249 trillion dong, focusing on potential debts. The bank’s capital loss was more than 2.145 trillion dong. The non-performing loan ratio (NPL) increased from 1.02 percent to 6.59%.
According to the explanation, Group Five debt accounted for nearly 1.9 trillion dong, including loans from a group of customers with collateral like Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) ( HoSE: STB), which were classified according to the decision of the State Bank of Vietnam (SBV). Since the beginning of the year, Kienlongbank had continuously lowered the selling price of these shares, but not yet succeeded.
Viet Capital Commercial Joint Stock Bank (Viet Capital Bank) ‘s NPL increased by 67 basis points to 2.26%, equivalent to nearly 807 billion dong. Both Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) and Saigon Hanoi Commercial Joint Stock Bank (SHB) recorded a 54-basis-point increase in NPL to 2.45 percent and 1.7%. Some other banks had increased fluctuating from 18 basis points to 37 basis points.
In some parties, group five debt increased sharply, for example Nam A Commercial Joint Stock Bank (Nam A Bank) had 180 percent higher debt than the beginning of the year, at 741 billion dong. Or as in Military Commercial Joint Stock Bank (MB), this figure was 174%, with 1.614 trillion dong. With Vietnam Export Import Commercial Joint Stock Bank (Eximbank) and VietCapital Bank, potentially liabilities also increased by 51 percent to 98%.
Five banks that went against the trend were Southeast Asia Commercial Joint Stock Bank (SeABank)
Petrolimex Group Commercial Joint Stock Bank (PGBank), NamABank and Techcombank. In particular, the NPL ratio at Techcombank decreased 42 basis points to 0.91%, in the top five of the lowest in the system. The bank sharply increased its provisioning by 34 percent to 7.948 trillion dong in the first six months, accelerating the handling of bad debts. Techcombank’s group five debt decreased by 1.6 trillion dong, to 903 billion.
Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) and NamABank also reduced their NPL ratio by 23 basis points to 32 basis points, to 1.66 percent and 3.19%, while the rates of PGBank and SeABank dropped by 7 basis points to 9 basis points.
After six months, the list of leading banks in on-balance-sheet debt quality did not change much. Asia Commercial Joint Stock Bank (ACB) and Sai Gon Joint Stock Commercial Bank (SCB) maintained NPL ratio of only 0.67 percent to 0.68%, while Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and Bac A Commercial Joint Stock Bank (Bac A Bank) kept it at 0.8 percent to 0.84%.
Bad debt coverage ratio fluctuated
Along with the increase in bad debt, provision for customer loans of some banks also increased. By the end of June, the loan provision at Vietcombank was 57 percent higher than the beginning of the year, at 16.371 trillion dong. The bank’s NPL ratio also increased from 179 percent to 254%, leading the system. Some other banks such as Tien Phong Commercial Joint Stock Bank (TPBank), Techcombank, NamABank, MB had their bad debt cover also increased by 10 percentage points to 15 percentage points.
On the other side, the bad debt coverage ratio dropped sharply at Kienlongbank from 86.6 percent to 16.7%. This target of VietinBank, SCB and ACB also decreased by 31 percentage points to 39 percentage points. Although the bad debt ratio decreased, ACB and SCB were still in the highest defense group in the system at 144 percent and 140 percent respectively. Some other banks also in the top for this indicator were BacABank, MB at around 121%. In the lower group such as TPBank, MB, Techcombank, this rate remained over 100%. The two state-owned banks BIDV and VietinBank hold this rate at 80 percent to 81%.
The State Bank of Vietnam (SBV) had issued Circular 01 providing guidance on credit institutions and foreign bank branches (collectively referred to as credit institutions) to restructure debt repayment terms, exempt, reduce interest fees, keep whole group of debt to support customers affected by Covid-19 translation. As a result, a part of outstanding loans could be converted into restructured bad debts, would still be accounted as qualified debt, so no provision was required.
According to Nguyen Tri Hieu, Circular 01 helped a number of businesses not be converted into bad debt group, in order to continue to borrow money from banks. However, this also put risks towards banks. Hieu believed that arising bad debts actually still exist, Circular 01 made a part of bad debts not appear in the financial statements. Banks should be cautious and had the necessary provisions for restructured bad loans.
