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Home / Economy / Banking & Finance
Bad debts to continue affecting banks' profits
Nguyen Tung 16:24, 2018/05/09
Credit institutions are now allowed to sell bad debts lower than the bookkeeping value under the Resolution No.42 in 2017, however, banks are still facing difficulties in dealing with bad debts.
As at present, Sacombank still have unresolved bad debts of VND50 trillion (US$2.19 billion), according to the bank's board of chairman, for which the majority is guaranteed by assets. 
 
​Bad debts to continue affecting banks' profits.
​Bad debts to continue affecting banks' profits.
The bank aims to raise VND15 - 20 trillion (US$657.7 - 877 million) from selling bad debts this year. 

In 2017, Sacombank has solved VND20 trillion (US$877 million) of bad debts, however, its rate still over 3%, higher than the limit set by the State bank of Vietnam (SBV). Consequently, Sacobank's profit has been reduced due to high provision required. The bank set its pre-tax profit at VND1.6 trillion (US$70.1 million). 

Recently, Sacobank is one of a few commercial banks stepping up efforts in dealing with bad debts, including the sale of bad debts to Vietnam Asset Management Company (VAMC). 

BIDV is one of the bank having the largest provision in the first quarter. Despite a growing revenue, BIDV's profit has been largely affected due to provision of VND6 trillion (US$236.1 million), said the bank's quarterly financial statement. BIDV posted profit at VND2.5 trillion (US$109.6 million) in the first quarter, in which its after-tax profit increased 8.5%. By the end of March, BIDV's bad debt is kept at 1.62%. 

OCB also reported its revenue at VND1.15 trillion (US$50.42 million), up 93%, according to the bank's quarterly consolidated financial statement. Consequently, OCB's operational expenses growth rate stood at 41.1% to VND398 billion (US$17.45 million), while provision also grew to VND140 billion (US$6.13 million), increasing 89%. 

However, the bank's pre-tax profit is posted at VND619 billion (US$27.1 million), 2.5 times higher than the same period of last year and achieving 31% of the year target at VND2 trillion (US$87.7 million). 

By the end of March, OCB's total assets worth VND77.6 trillion (US$3.4 billion), down 7.9% compared to the year beginning. The bank's capital mobilization was down at 0.3% to VND53 trillion (US$2.32 billion). 

Additionally, credit growth of OCB reached 8.8%, taking the credit balance to VND51.9 trillion (US$2.27 billion). OCB's bad debts increased by VND253 billion (US$11 million) to VND1.1 trillion (US$48.23 million). OCB's bad debt ratio has increased from 1.79% by the end of 2017 2.13% at the end of March in 2018. 

Resolution No.42 is expected to create legal certainty and resolve the inadequacies of the former regulations regarding the process of handling bad debts. Some notable components of Resolution No.42 are the inclusion of a new method for handling bad debts and new approaches for dealing with collateral composed of land use rights, as well as assets attached to land, land formed in the future, and real estate projects.
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