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Banks report high bad debts despite handsome profits

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Although many commercial banks achieved positive business results with high profits last quarter, bad debts increased sharply in the period, according to Lao Dong newspaper.

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Customers are seen transacting at an office of Techcombank. Local banks reported high bad debts despite handsome profits last quarter 

 

Most banks have publicized their financial reports for quarter three. Accordingly, 21 out of 26 banks have reached 70% of their full-year targets, while giants in the banking system, such as Bank for Foreign Trade of Vietnam (Vietcombank), Bank for Investment and Development of Vietnam (BIDV) and Technological and Commercial Joint Stock Bank (Techcombank), have achieved 90% of their targets for the whole year.

High profits reported

Local banks posted a combined pretax profit of more than VND67 trillion (US$2.9 billion) in the quarter three, surging 41% year-on-year.

Of this amount, banks with profits of trillions of Vietnamese dong were Vietcombank, Vietnam Bank for Industry and Trade (VietinBank), BIDV, Vietnam Prosperity Joint Stock Commercial Bank (VPBank), Techcombank, Military Bank (MB), Asia Commercial Bank and HCMC Development Joint Stock Commercial Bank (HDBank).

Vietcombank reported the highest gross profit of VND7.4 trillion last quarter, rocketing 41.6% over the previous quarter and taking the total in the year to September to nearly VND11.7 trillion in gross profit and nearly VND9.4 trillion in net income.

Techcombank came second with a pretax profit of some VND7.8 trillion in the nine months, up 61% over the year-ago period, followed by VietinBank with VND7.6 trillion, BIDV with VND7.3 trillion, VPBank with VND6.1 trillion and HDBank with VND2.9 trillion.

Large bad debts

Despite high profits, local banks’ bad debt ratios were hovering in the range of 0.7% and 4.7%. Vietcombank, VietinBank and BIDV reported respective bad debt ratios of 1.18%, 1.36% and 1.75%, rising by 0.04, 0.23 and 0.13 percentage point over late last year.

Potentially irrecoverable debts (group 5) accounted for up to 72% of the total bad debts and soared in some banks in the third quarter of the year, especially at VietinBank, which saw a surge of 68%.

In January-September, bad debts at VietinBank surged 34.5% to hit VND12.1 trillion, while BIDV reported total bad debts of VND17 trillion, up 21.1% against late last year.

Saigon Thuong Tin Commercial Bank and VPBank also had high bad debt ratios, at 3.2% and 4.7%, respectively.

MB, despite its impressive performance in the last quarter, posted a surge in bad debts. Its pretax profit reached more than VND6 trillion in the year up to September, up a whopping 50% over the same period last year and reaching 88% of the full-year target. However, its bad debts in the period soared by 45% versus early this year.

Nguyen Van Du, deputy chief inspector of the Banking Supervision Agency under the State Bank of Vietnam, had earlier noted that local credit institutions had settled VND138.3 trillion of bad debts.

The high bad debts were not completely due to banks’ performance but were also attributable to poor production and business performance of banks' individual and corporate customers as well as market fluctuations, Vietcombank Chairman Nghiem Xuan Thanh stated, calling for the cooperation of the relevant agencies in settling bad debts.

 

 

Source: SGT 

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