A transaction office of VietinBank (Photo: VietinBank) Hanoi (VNS/VNA) -Non-performing loans are still increasing despite slow credit expansion as theCOVID-19 pandemic stretches many businesses to their limits.
The first-half financialstatements of big banks like Vietcombank, BIDV and Vietinbank all indicated anincrease in non-performing loans (NPLs).
Total NPLs of Vietcombankincreased 11 percent in the last six months, pushing the bad debt ratio up to0.83 percent from 0.79 percent, of which subprime loans jumped 58 percent anddoubtful debts climbed 56 percent.
Ending June, NPLs at BIDV grew17 percent over the beginning of the year, of which subprime and doubtful loansincreased by 11 percent and 21 percent, respectively. The lender’s bad debtratio increased from 1.75 percent to 2 percent.
The ratio of bad debt tooutstanding loans at Vietinbank rose from 1.16 percent to 1.7 percent afterNPLs jumped 48 percent in the first half. Subprime and doubtful debts climbed250 percent and 84 percent, respectively.
This trend could also be seenin smaller banks.
Sacombank’s bad debt ratioincreased from 1.94 percent to 2.15 percent by the end of June. This ratio was1.93 percent in Orient Commercial Joint Stock Bank (OCB), up from 1.84 percentat the beginning of this year.
Asia Commercial Bank’s bad debtratio was up from 0.54 percent to 0.68 percent after NPLs climbed 32 percent to1.9 trillion VND (82.3 million USD), excluding debts worth 2.08 trillion VND atACB Securities.
Bad debts at Eximbank increased12 percent to 2.16 trillion VND by the end of June, lifting the bad debt ratioto 2.08 percent from 1.71 percent.
The COVID-19 pandemic hadnegatively affected business activities, leading to an increase in NPLs at manybanks, even though banks have rescheduled debts for customers affected by thepandemic until the end of September 2020 under the direction of the State Bankof Vietnam (SBV).
According to Tran Du Lich, amember of the National Advisory Council on Financial and Monetary Policies,rising bad debts at banks is inevitable but are still under control.
In fact, the central bank haswarned bad debt of the whole industry will likely increase to 3-4 percent thisyear, which is still kept in check, with banks quickly setting up riskprovisions.
In the first six months,Sacombank’s provision for credit losses increased by 50 percent to nearly 1.57trillion VND. Eximbank also set aside more than 220 billion VND for a loan lossreserve fund which lowered its pre-tax profit by 28 percent to 552 billion VND.
Increases in subprime anddoubtful debts also compelled OCB and Vietcombank to increase its loan lossprovisions by 49 percent and 21 percent, respectively.
Credit to rise slowly in H2
A recent report of SBV showeddemand for credit was very weak in the recent past, especially in April and Maywhen the country was affected by the lockdown due to the pandemic.
Credit increased by just 0.12 percentin April and 0.53 percent in May and improved by 1.28 percent in June. Bymid-July, credit expansion reached a seven-year low at around 4 percent.
In its July report, Bao VietSecurities (BVSC) said liquidity of the banking system is still abundant,reflected in very low interbank interest rates (0.15-0.3 percent per annum forovernight, 1-week and 2-week terms).
BVSC expects credit to improvein the second half albeit slowly amid the complex developments of the pandemicin the country, making enterprises more vigilant on business prospects andproduction expansion plans.
Credit growth for the wholeyear is forecast at around 10 percent.
Meanwhile, a survey on businesstrends in the third quarter of 2020 of credit institutions, conducted by the SBV’sMonetary Forecasting and Statistics Department, showed credit institutions havelowered their forecasts on outstanding loan growth in two consecutive surveyperiods.
The outstanding credit of thebanking system is predicted to grow by 3.5 percent in the third quarter and10.5 percent in 2020, considerably lower than the expectation of 13.1-14.1 percent,respectively recorded in the two previous surveys.
The pressure to set money forloan losses reserve fund is expected to greatly affect the income and pre-taxprofit of banks in 2020.
Finance-banking expert Can VanLuc also predicted although credit demand will recover in the last half, creditgrowth for the whole year will not be too high at around 9-10 percent./.
VNA
