Shifting nature of bank bad debts

VET takes a closer look at the bad debts of Vietnamese banks as at the end of the first quarter.

Figures from ten Vietnamese banks reveal the cumulative bad debt ratio has increased from 1.87 per cent at the end of 2016 to 1.9 per cent as at March 31.

Total bad debts increased 6 per cent to VND50.7 trillion ($2.23 billion), mainly in the form of Group 1, standard debt, which was up 13 per cent during the first quarter to VND15.75 trillion ($692.7 million), and Group 2, debt needing special attention, which was up 18 per cent to VND7.94 trillion ($349.2 million).

Notably, Group 5 debt, potentially irrecoverable debt, fell 0.1 per cent during the period but still represents the majority of the total, standing at VND27 trillion ($1.2 billion) as at March 31.

Four out of six banks saw a lower bad debt ratio at the end of the first quarter: Sacombank, Vietnam International Bank (VIB), Vietcombank, and Kienlongbank. Sacombank’s bad debt ratio fell from 5.35 per cent at the end of 2016 to 4.88 per cent as at March 31, but remains the highest of the ten banks.

Its total bad debts reached a record high of VND10.1 trillion ($444.2 million) as at the end of the first quarter. This excludes the VND37.76 trillion ($1.66 billion) in debts sold to the Vietnam Asset Management Company (VAMC), Vietnam’s debt bank. Together, the amount of bad debts at Sacombank reached as much as VND47.84 trillion ($2.1 billion). On the positive side, the bank’s potentially irrecoverable debts were down 7 per cent during the first quarter, standing at VND6.6 trillion ($290.3 million) as at March 31.

Eximbank, meanwhile, saw its bad debt ratio approach the 3 per cent threshold during the quarter, totaling VND2.59 trillion ($114 million) as at the end of March. Potentially irrecoverable debts amounted to VND1.26 trillion ($55.4 million), up 11 per cent.

BIDV, the leading bank in terms of total assets, followed, with bad debts surging from 1.99 per cent as at the end of 2016 to 2.14 per cent as at March 31. Its total bad debts during the first quarter rose 13 per cent to VND16.25 trillion ($714.7 million).

Fourth on the list was VIB, with a bad debt ratio of 1.96 per cent as at March 31, significantly down from the 2.58 per cent on December 31. Its total bad debts have fallen by the largest amount within the ten banks, standing at VND1.25 trillion ($55 million) as at the end of the first quarter. Potentially irrecoverable debt fell 13 per cent to VND1.17 trillion ($51.5 million).

Techcombank’s bad debt ratio rose from 1.58 per cent to 1.89 per cent during the first quarter, reaching VND2.6 trillion ($114.35 million) as at March 31, up 16 per cent quarter-on-quarter. Its potentially irrecoverable debt amounted to VND1.5 trillion ($66 million), up 10 per cent compared to the end of 2016.

Military Bank (MBB) recorded a bad debt ratio as at the end of the first quarter of 1.35 per cent, with potentially irrecoverable debt rising nearly 40 per cent during the period to VND854 billion ($37.6 million), while debt needing special attention rose by 50 per cent to VND730 billion ($32.1 million) as standard debt fell by half, to VND435 billion ($19.1 million) as at March 31.

Vietinbank, the leading bank in terms of stockholder equity, saw its bad debt ratio rise by 17 per cent to VND7.92 trillion ($348.3 million) as at March 31. This was mainly due to an increase in standard debt of 70 per cent to VND3.6 trillion ($158.3 million). Potentially irrecoverable debt, meanwhile, fell 9 per cent during the period to VND3.5 trillion ($154 million). Its first quarter consolidated financial statement did not reveal how much bad debt has been parked at VAMC, but the bank, however, has a plan to buy back its debt from the debt bank this year. As at the end of March, Vietinbank’s bad debt had surged from 1.02 per cent as at December 31 to 1.13 per cent.

At Vietcombank, its bad debt ratio as at the end of the first quarter was lower than at BIDV and Vietinbank, at 1.48 per cent against 1.51 per cent as at December 31. Total bad debts stood at VND7.4 trillion ($325.4 million), up 6 per cent quarter-on-quarter, in which irrecoverable debt was up 3 per cent to VND4.4 trillion ($193.5 million) and debt needing special attention had increased 40 per cent to VND1.9 trillion ($83.5 million).

Kienlongbank and Bac A Bank are the two banks that kept their bad debt ratios below 1 per cent, standing at 0.96 per cent and 0.82 per cent, respectively, as at March 31.

by Duy Anh / VET