Banks step up bad debt resolution

An Binh Commercial Joint Stock Bank (ABBank) said the bank aimed to reach VND1.3 trillion (US$56.52 million) in pre-tax profit and clear all bad debt kept at Vietnam Asset Management Company (VAMC) this year. It also expected to increase the provision for risky loans this year by 69% against 2019 to some VND837 billion, the tinnhanhchungkhoan.vn reported.

Under a State Bank of Vietnam (SBV) policy, the SBV-controlled VAMC agreed to buy bad debts of commercial banks and recover the debts to reduce the bad debt ratio of the entire banking system in 2015. At that time, many banks had to sell bad debts to VAMC so they could take the debts off their balance sheet to have a bad debt ratio of below 3% as required by the central bank.

After buying the bad debts, the VAMC tried to recover the debt, but some debts haven't been settled to date. Banks, therefore, would have to receive back the debts from the VAMC in 2020, according to the SBV's policy.

Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) general director Nguyen Duc Thach Diem said that Sacombank still has NPLs worth more than VND25 trillion at the VAMC, so the bank is trying to handle and recover all the debts.

Diem said Sacombank aims to handle VND11 trillion of bad debts this year. As the bank successfully auctioned VND9.7 trillion of debts in the first five months of this year, it expects to meet the target by the end of this year.

However, Sacombank’s representative said the pandemic has hampered the bank’s handling of bad debts.

At Vietnam Export Import Commercial Joint Stock Bank (Eximbank), the bank’s bad debt ratio was at 1.62% by the end of 2019 and it is speeding up the settlement of bad debts to soon clear all its bad debts kept at the VAMC.

Eximbank still holds VAMC’s special bonds worth about VND3.2 trillion by the end of 2019. With a provision of nearly VND2.1 trillion for the bonds to date, the bank will need an addition of VND1.1 trillion to clear all debts at the VAMC.

Though Eximbank plans to settle all the debts kept at the VAMC this year, the target might be affected due to the COVID-19 pandemic.

In a report on impact of the COVID-19 pandemic released recently, financial database platform FiinPro estimated the ratio of new bad debt arising in the first quarter this year of 18 banks listed on stock exchanges was 0.23%, increasing from the previous seven quarters and equivalent to the rate of the first quarter of 2018.

By the end of the first quarter this year, the bad debt ratio of the banks was 1.65%, up 1.44% compared to the end of 2019. However, the rise didn’t reflect all the impacts of the COVID-19 pandemic as the central bank in Q1 issued new regulations on allowing commercial banks to restructure the debts of pandemic-affected borrowers.