Pre-tax banking profits grow - as do bad debts

Vietcombank takes the lead

The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) continued to take the lead in pre-tax profit in the first nine months of the year. However, the gap has been narrowed significantly. Following a three-percent decrease in first-half pre-tax profit, Vietcombank’s third-quarter figure fell over 20 percent to more than VND4.98 trillion. Except for foreign exchange trading, which is Vietcombank’s strength, activity of other business divisions remained flat or declined. Net profits declined with provision for bad debts increasing 25 percent in the first nine months of the year.

The Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) recorded pre-tax profit of nearly VND900 billion in the third quarter of the year, a drop of 13 percent compared to a year ago. Its net interest income grew by nearly 15 percent in the first nine months of the year. Similar to Vietcombank, Sacombank also saw less profit as provision for bad debt went up nearly 70 percent.

While Vietcombank and Sacombank reported profit declines, the Vietnam Prosperity Joint Stock Commercial Bank (VPBank) saw a 30-percent increase in pre-tax profit in the first nine months of the year thanks to declining operating costs by nearly six percent and unchanged risk provision fund expenses.

The Vietnam Technological and Commercial Joint Stock Bank (Techcombank) also announced its business results in the first nine months of the year, with revenue and pre-tax profit increasing by 33.5 percent and 20.9 percent to VND19.3 trillion and over VND10.7 trillion, respectively.

Military Commercial Joint Stock Bank’s (MB) profit rose by nearly seven percent in the reviewed period, while Asia Commercial Bank’s (ACB) figure was up 15 percent to over VND6.41 trillion.

Increased bad debts

Most banks reported profit growth in the first nine months of the year, but bad debts posted a significant increase due to the impact of the Covid-19 pandemic. Accordingly, Vietcombank’s bad and doubtful debts were up 15 percent to nearly VND7.9 trillion, while VPBank’s debts rose by 15 percent to over VND10 trillion.

MB and ACB also share the similar scenario. MB’s bad and doubtful debts increased by 39 percent in the first nine months of the year, while ACB’s debts surged by 71 percent.

According to a report compiled by financial data provider FiinGroup, the financial health of businesses and their ability to repay debts have declined and people’s incomes have dropped - developments that are expected to affect the quality of credit in the near future.