VietNamNet Bridge - Commercial banks’ provisioning costs have been increasing, even though bank restructuring has been proceeding well.

 

The Q4 financial report of Sacombank pointed out three problems the bank is facing:  asset quality was affected after it admitted Southern Bank; its plan on issuing shares to strategic partners has not made progress; and expenses on provisioning against risks have increased sharply.

The provisioning cost is predicted to continue rising in 2015 as the bank plans to expand its network. The bank may have to pay VND1.228 trillion in 2015 in provisioning for commercial loans against risks, an increase of 27.5 percent in comparison with last year.

At Sacombank, the bad debt ratio was 1.19 percent in 2014 and 1.46 percent in 2013, while the bad debt coverage ratio increased from 84 percent in 2013 to 90 percent in 2014, while the provisioning cost increased by 121.5 percent to VND962 billion.

In principle, the higher cost will eat into banks’ profits. This was also the problem Eximbank faced in 2014. 

The bank’s financial report showed that though the business was weak, the operation costs fell very modestly, by 6 percent in comparison with 2013. 

The bank reported it incurred a pretax loss of VND878 billion in the fourth quarter of 2014, which was 2.7 times higher than that of the same period of 2013.

The bank’s Q4 report also showed that of the outstanding loans worth VND87.147 trillion by the end of the last year, VND246 billion had been listed as subprime loans and VND1.344 trillion as irrecoverable.

Bad debts

Analysts have all agreed that banks have gained encouraging results. However, some banks still cannot escape their difficulties, and are bogged down in their bad debts.

A banker who asked to be anonymous said the non-performing loan ratio of his bank had increased slightly, though the bank had been speeding up the restructuring plan. 

One of the reasons behind this is the slow pace of the Vietnam Asset Management Company’s debt settlement. The solution of buying debts in accordance with the market price has not brought the desired effects, he said.

Meanwhile, the director of a joint stock bank in HCM City attributed this to the slower-than-expected recovery of the real estate market. Since banks still find it difficult to sell land and houses, which are collateral for loans, debt collection has not proceeded as quickly as hoped. 

Deputy general director of DongA Bank Nguyen Thi Kim Xuyen said that though the bank has been speeding up the sale of debt to VAMC, the non-performing loan ratio has been rising, which has made it difficult to increase lending.

DNSG