Despite a difficult economic year caused by the Covid-19 pandemic, Vietnam’s banking sector continued to post positive performance, which lays a solid foundation for banks to gain strong growth in 2021.

Customers at VIB bank. Photo: Tran Viet.

In early 2021, TPBank became the first bank releasing the financial statement for last year. The local lender’s asset value surged 24.47% year-on-year to VND206.3 trillion (US$8.97 billion), exceeding 14% of the year’s target.

Thanks to effective cost-saving measures and the adoption of digital banking, TPBank’s pre-tax profit expanded by 11% year-on-year and stayed above 8% of the year’s plan.

Other banks such as Sacombank, VIB, or LienVietPost Bank have also attained their respective profit targets in 2020. Among those, VIB completed its profit target 2 months in advance with VND4.56 trillion (US$198.5 million) in just 10 months, exceeding the profit of VND4.08 trillion ($177.6 million) in 2019.

LienVietPostBank also realized its profit target in nine-month period attaining VND1.74 trillion ($75.7 million), up 6.4% year-on-year.

CEO of ABBank Le Hai said the bank is on track to exceed all targets set at the shareholder meeting with a pre-tax profit of VND1.37 trillion ($59.6 million) as of November 2020, 1% above the profit target for the year.

With 2020 being the deadline for banks to meet requirements on capital adequacy ratio (CAR) under Basel II standards, a number of banks, including SHB, LienVietPostBank and HD Bank, have all announced their qualification for the requirements in the final days of 2020.

Bad debts remain a concern

While most banks have seen their profits growing, bad debts remain a major concern. At Vietcombank, the bad debts as of third quarter 2020 surged 36% against the beginning of the year to VND7.88 trillion ($340.5 million).

MBBank also faces a similar situation with its bad debts rose by 39% to VND4.03 trillion ($174.1 million), taking the ratio of bad debts to total outstanding loans to 1.5% from the previous 1.16%.

The BIDV is increasing its provision to settle the debt amount of VND4.6 trillion (US$198.8 million) in the third quarter of 2020, up 84.7% against the previous quarter and 42% year-on-year.

Governor of the State Bank of Vietnam (SBV) Nguyen Thi Hong said the total amount of bad debt from 14 out of 16 commercial banks rose by 30% in the first nine months of 2020. The figure, however, is set for further increase as the economy continues to be under pressure from the Covid-19 crisis.

In 2021, risks of bad debts at banks could become clearer as the Covid-19 pandemic expected to persist for a longer period.

Banking expert Nguyen Tri Hieu predicted the banking sector to have a bright outlook in case the economy subject for a strong rebound.

“Bad debts, however, could be a major risk that banks should be cautious about,” Mr. Hieu noted.