Hanoi (VNS/VNA) - Though banks gained profits oftrillions of Vietnamese dong in Q3 2022, credit quality has remained aconcern of the banking industry, especially when Circular No. 14/2021/TT-NHNNon loan rescheduling for COVID-19 affected borrowers expired at the end of Junethis year.

Among banks that have already published Q3 2022 financial statements, only afew recorded declines in the bad debt ratio compared to the beginning of theyear, online newspaper dantri.com.vn reported.

HDBank’s bad debt ratio dropped from 1.65% at the beginning of 2022 to 1.54%,while that of SeABank also fell from 1.65% to 1.59%, and Techcombank, from 0.66%to 0.65%. The ratio of BaoVietBank, MSB and Eximbank also declined from 4.9% to3.2%; 1.74% to 1.08%; and 1.96% to 1.9%, respectively.

Though the bad debt ratio on total outstanding loans of the banks all declined,their irrecoverable debts increased at some banks. The increase ofirrecoverable debts at SeABank, HDBank, Techcombank, MSB and Eximbank was 11.2,35, 46, 3 and 21%, respectively.

Other banks including ABBank, TPBank, BacABank, Saigonbank, PGBank,LienVietPostBank, VietCapitalBank, ACB and MB recorded an increase in the baddebt ratio. In which, only PGBank saw a slight decline in irrecoverable debts.The increase in irrecoverable debts was 124% at TPBank, 131% at ACB, 85% at MB,99.7% at VietBank, 43% at Saigonbank, 35.6% at LienVietPostBank and 39% atABBank.

Earlier, banking experts repeatedly warned about the adverse impacts of thepandemic on the production and business activities and the solvency ofborrowers, which would put pressure on the bad debt developments at banks.

According to banking expert Nguyen Tri Hieu, Circular No. 14/2021/TT-NHNN,which allowed banks to reschedule the loan payment time and maintain the samedebt group for COVID-19 affected borrowers, has caused the bad debts of thebanking industry to be calculated inaccurately, as under the regulation anumber of debts that should have been bad debts have been restructured andmaintained to be qualified debts.

The expiry of Circular No. 14/2021/TT-NHNN from the end of June this year hadmore realistically reflected the bad debt situation at banks, experts said.

As bad debts have increased, many banks, such as Techcombank, VPBank, BacABank,HDBank, ABBank and Eximbank, also raised their provisions for risky loanscorrespondingly in Q3 2022 compared to the same period of last year.

The increase in the provisions caused profits of some banks to see a slowdown.At Saigonbank, for example, the risk provisioning costs of banks in Q3 2022nearly doubled to 20.8 billion VND, which was one of the reasons for the bank’slow profit growth rate of 4% in the period.

ABBank’s deputy general director Do Lam Dien also attributed the bank’sreduction of nearly 80% in profits in Q3 2022 to its high increase inprovisions for risky loans. In a document sent to the State SecuritiesCommission, Dien said the bank’s provisions in Q3 2022 increased by 3.6 timescompared to the same period of last year to 310 billion VND. In Q3 2022, ABBankalso bought back 400 billion VND of special bonds from Vietnam Asset ManagementCompany (VAMC).

According to Dang Tran Phuc, chairman of financial company AzFin Vietnam, theincrease of the provisions does not help lower the bad debts but only improvesthe resistance for banks.

However, Phuc said, banks with low provisioning rates might have to raise theirprovisions in the future while banks with high provisioning rates would be ableto increase profits from the reversal of the provisions./.