Sunday, 17 Feb 2019

Non-performing loans on the rise again

Updated at Wednesday, 16 May 2018, 14:15
The Hanoitimes - Financial reports of 13 large- and medium-sized banks showed that eight of them had the non-performing loans (NPL) ratio rose in the first quarter of this year.
Accordingly, the total non-performing loans of 13 commercial banks by the end of Q1 2018 rose by 8 per cent against the end of last year to VND67.8 trillion (US$2.97 billion).
BIDV spent over VND6 trillion for provision in Q1 2018
BIDV spent over VND6 trillion for provision in Q1 2018
Among the loans, potentially irrecoverable debts even increased higher by 9.2 percent to VND34.6 trillion. The debts accounted for 51 percent of the total NPLs, compared with 50.5 percent at the end of last year. 
In Vietnam, debts are classified into five groups based on the degree of risk. These are standard debts, debts needing special attention, subprime debts and doubtful debts, in addition to potentially irrecoverable debts. The last three are NPLs.
In the first three months, the 13 banks spent nearly VND14.7 trillion for provision of risky debts, a year-on-year increase of 36.9 percent.
Despite the surge for the provision, many banks were estimated to meet 25-30 percent of their annual profit targets by the end of March thanks to high credit growth, although the first quarter is usually the most sluggish for banks.
According to Luu Trung Thai, general director of Military Bank, the turnover of his bank in the first quarter is estimated at VND3.5-3.6 trillion ($154.2-158.6 million), while the minimum pre-tax profit is at some VND1.6 trillion, up 44 percent year-on-year.
With the rise, Thai believed that it is feasible for his bank to meet the VND6.8 trillion profit target set for this year, up 47 percent against last year.
Chairman of VIB Dang Khac Vy said his bank’s cost-income ratio reached 52 percent and pre-tax profit exceeded VND500 billion in the first quarter, three times higher than the same period last year.
By the end of the first quarter, VIB met 25 percent of its total pre-tax profit target of VND2 trillion set for 2018.
With a monthly profit of some VND350 billion, HDBank estimated its profit to reach nearly VND1.05 trillion in the first quarter, three times higher than the same period in 2017. With a profit target of VND3.9 trillion for 2018, the bank has already met 28 percent of the annual plan.
LienVietPostBank achieved 28 percent of the annual profit target as it posted a pre-tax profit of more than VND500 billion by the end of the first quarter.
Experts attributed the positive business performance of banks to the credit growth right at the beginning of the year. According to the National Financial Supervisory Commission, outstanding loans in the banking system, as of March-end, were estimated to have risen by 3.5 percent against December last year, of which loans in VND increased by 3.3 percent and accounted for 91.9 percent of total outstanding loans.
Assessing the factors affecting the banking sector in 2018, analysts of Saigon Securities Incorporation (SSI) said credit would continue to be improved, in which the opportunity of consumer credit to prosper was highly valued.
According to SSI, the average cost of capital in 2018 will be reduced because of the Government’s support policies and significant improvement in the balance of payments in 2017 and 2018. 
The sale of stake in State-owned enterprises in 2018 will continue to attract a large amount of foreign capital, leading to the need to pump a large amount of local currency into the system, SSI said.
Considering the above factors, SSI predicts that profits in 14 listed banks will surge at an average of 32.9 per cent in 2018.
Ha Thu
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