BIDV, Vietcombank, and Vietinbank amass nearly $2 billion in bad debts
Growing bad debts reaching hundreds of millions of US dollars keep pressuring BIDV, Vietcombank, and VietinBank.
As of the end of June, the three banks’ total bad debts reached VND41.265 trillion ($1.79 billion), up 6.5 per cent against early 2019 and 22 per cent on-year. In addition, irrecoverable debts occupied more than half of their bad debts.
BIDV ran the highest debt with VND21.121 trillion ($918.3 million), up 12.3 per cent against the beginning of this year. Especially, its irrecoverable debts accounted for 46 per cent of total bad debts, equaling VND10.492 trillion ($456.17 million), substandard loans rose by 12 per cent to VND6.105 trillion ($265.43 million), while doubtful debts fell by 27 per cent to VND4.524 trillion ($196.7 million).
The rapidly expanding irrecoverable debt also raised BIDV’s bad debts to total outstanding loan balance from 1.9 per cent in early 2019 to 1.98 per cent in late June.
Vietcombank’s bad debts also increased to VND7.134 trillion ($310.17 million), up 15 per cent against early 2019. Accordingly, irrecoverable debts currently occupy 67 per cent of the bank's total bad debts. However, the bank has not been subject to much pressure because it increased its provisioning for bad debts by 80 per cent on-yearand it has managed to clear its debts at Vietnam Asset Management Company (VAMC), while BIDV and VietinBank have trillions of VAMC bonds.
Contrary to Vietcombank and BIDV, VietinBank’s bad debts fell significantly in 2019’s first six months. Accordingly, it holds VND13.010 trillion ($565.65 million) in bad debts, down 5 per cent against the beginning of this year. Its irrecoverable debts fell by 22 per cent to VND7.348 trillion ($319.48 million) but still accounts for 56 per cent of the total bad debts on its internal balance sheet.
In addition, VietinBank and BIDV have yet to announced the value of their outstanding bonds in VAMC. Previously, as of the end of 2018, BIDV and VietinBank’s bad debts at VAMC remained at VND14 trillion ($608.7 million) and VND13 trillion ($565.22 million), respectively. Among them, BIDV and VietinBank set provisions of VND7.6 trillion ($330.43 million) and VND2.23 trillion ($96.96 million), respectively.
2019’s first six months saw the three banks set aside trillions of VNDs in provisions. VietinBank’s provision costs skyrocketed by 63 per cent to VND4.236 trillion ($184.17 million), eroding 66 per cent of its net profit. Meanwhile, BIDV’s provision cost increased by 6.8 per cent to VND10.71 trillion ($465.65 million), and occupied 69 per cent of the bank’s net profit. Vietcombank's provisions also slightly rose by 2.5 per cent to VND3.317 trillion ($144.22 million).