VietNamNet Bridge – Commercial banks have reported unsatisfactory business results for the third quarter of the years because of the high risk provisioning against bad debts.

Banks’ finance reports show their profits decreasing dramatically in the third quarters because the high bad debts have eaten up their profit.

The post tax profit of LienVietPostBank in the third quarter was just equal to 81 percent of the same period of the last year, 67.6 billion dong. As such, the bank had got the profit of 467.9 billion dong by the end of the third quarter, lower by 52 percent than the same period of the last year.

BaoVietBank has also reported that its post tax profit was modest at 5.2 billion dong, lower by 1/6 of the net profit of the same period of the last year. Its nine-month accumulative profit has reached 73.8 billion dong, down by 24.6 percent.

Especially, ACB, one of the biggest commercial banks in Vietnam, has reported the post tax loss of 496 billion dong in the third quarter. Though the bank still had made a profit of 896.4 billion dong by the end of the third quarter, the profit was 57 percent lower than the same period of the last year.

Vietcombank, also a big guy in the banking system, has reported the net profit in the first nine months of the year down by 2.14 percent.

Eximbank has not released the third quarter’s finance report yet, but it had only fulfilled 50 percent of the yearly plan by the end of August.

Of the commercial banks which have released the Q3 finance report, Vietinbank is the only bank which does not see the profits down.

Explaining the profit decreases, Bao Viet Bank said the bank has made higher provisioning against the credit risks in the context of the economic downturn which has badly affected the bad collection.

In the third quarter alone of the year, Bao Viet Bank provisioned 40.5 billion dong against the bad debts. Meanwhile, the figure was only 4.9 billion dong in the same period of the last year. Especially, the provisioned money jumped by two folds from 25.3 billion dong in the first three quarters in 2011 to 51.3 billion dong this year.

High provisioning was also the reason cited by LienVietPost Bank to explain the sharp fall of the banks. The provision in Q3 of 2012 is seven times higher than that of Q3 of 2011.

Though the two big guys--Vietinbank and Vietcombank have reported the provisioning decreases in Q3, their nine-month provision was much higher than that of the same period of 2011. Vietinbank’s provision increased by 26 percent, while Vietcombank by 52 percent.

Vietcombank, which has always been following the cautious credit policy, has also shown problems in the lending quality. The bank’s potentially irrecoverable loans of the bank had reached 3211 billion dong, higher by 41 percent than that at the end of 2011. Meanwhile, the doubtful debts had increased by nearly 30 percent over the last nine months, and the subprime debts had increased by 2.5 times.

Nguyen Thanh Toai, Deputy General Director of ACB, said the higher provisioning by commercial banks showed the dark picture of the banking system’s bad debt.

He went on to say that this was one of the most important reasons behind the sharp falls of bank profits.

As for ACB, Toai said, two percent of the bank’s mobilized capital is in gold. Since people rush to withdraw gold deposits from the bank in the context of the gold price increases has led to the decrease of the bank’s total assets.

1 USD = 20,000 VND.

Compiled by C. V