Banks in the first 6 months of the year: Profits decreased, bad debt increased, provisions for loss

ANTD.VN - The delay of difficulties caused by the Covid-19 pandemic for the banking industry seems to have fallen into the second quarter of 2023 when banks simultaneously announced a decline in profits compared to the same period, while bad debt tends to increase.

Profits fall

Up to this point, An Binh Commercial Joint Stock Bank (ABBank) and Ban Viet Bank are the two banks with the biggest profit decline.

In the second quarter, ABBank's pre-tax profit only reached VND67 billion, down 94% compared to the same period last year. In the first 6 months of the year, ABBank recorded VND679 billion in pre-tax profit, down 59% compared to the first 6 months of 2022.

The reason for the decline in ABBank's profits is due to increased bad debt, which forced the Bank to reduce lending interest and increase risk provisions, affecting business efficiency (ABBank's bad debt increased by 61.5% compared to the beginning of the year, to more than VND 3,800 billion).

Similarly, BVBank recorded a 92% decrease in profit in the second quarter and an 89% decrease in the first 6 months of the year, reaching only 13 billion VND.

VPBank also saw a decrease in pre-tax profit of 11% in the second quarter and a decrease of 48% in the first half of the year, to nearly 8,000 billion VND. Or LPBank also saw a decrease in profit of 51% in the quarter, to 880 billion VND and in the first 6 months, it also decreased by 32%, to 2,446 billion VND.

Many banks recorded sharp declines in profits in the first 6 months of the year.

At TPBank , in the second quarter of 2023, pre-tax profit reached only VND 1,618 billion, down 25% over the same period last year. In the first 6 months of the year, this bank recorded nearly VND 3,400 billion, 11% lower than the VND 3,788 billion of the same period last year.

BacABank also witnessed a 25% decrease in profit compared to the same period in Q2/2023, reaching 139 billion VND before tax. However, thanks to positive results in Q1/2023, the bank still had an 11% profit growth in the first 6 months of the year, reaching 474 billion VND.

Another major bank that also recorded a decline in profits is Techcombank , with a 23% decrease compared to the same period last year in this second quarter, to nearly VND5,650 billion. Accumulated in the first 6 months of the year, Techcombank achieved VND11,272 billion in pre-tax profit, down 20% compared to the first 6 months of 2023.

Some other banks also recorded negative profit growth such as SeABank down 28%; Eximbank down 26%; VietABank down 7.5%...

According to statistics, up to this point, out of 24 public banks reporting business results, half, or 12 banks, had lower profit growth than the same period in the first 6 months of the year.

Other banks' profit growth was also much more modest than last year. The most positive were Sacombank with a 64% increase; OCB increased by over 47%, PG Bank 24%; MSB increased by only 6% and Saigonbank also increased by only 4%...

In the big 4 group, after 6 months, all banks were profitable. Of which, Vietcombank's profit increased by 18%, BIDV's increased by 26%; VietinBank's by 8%...

The decline in bank profits was in the previous forecast of many organizations. Experts from VCBS Securities Company in a recent report lowered the forecast for credit growth to about 12% in 2023 and pre-tax profits are also expected to increase more slowly, with the growth rate reaching only about 10%.

Ho Chi Minh City Securities Company (HSC) also estimated that the average profit of the research banking group will only increase by about 12-15% in 2023.

Bad debt increases, risk provisions narrow

Notably, banks recorded increased profits mainly from cutting credit risk provisioning costs.

For example, at Saigonbank, this bank has reduced its provisioning costs by more than half, from 181 billion VND to more than 85 billion VND. If excluding this cost, Saigonbank will also suffer the same profit reduction as other banks.

According to Mr. Nguyen Quoc Hung, Vice Chairman and General Secretary of the Vietnam Banking Association, from the end of 2022, the bad debt ratio of the whole system was 1.92%, but by the end of the second quarter of 2023, bad debt of credit institutions increased sharply compared to before. Potential bad debt up to now is 5.34%, many banks have bad debt ratio increased by over 3%, some banks and financial companies have bad debt increased suddenly by over 5%.

Similarly, the driving force behind PGBank's profit growth in the first 6 months of the year also came mainly from cutting risk provisioning costs (down 39% compared to the same period in 2022). This bank recorded a mere 32 billion VND in pre-tax profit increase in the second quarter, of which 26 billion VND came from reducing credit risk provisioning costs.

At BacABank, the Bank also reduced risk provisioning costs by more than 55% in the first 6 months of the year, which was the main reason for the profit increase.

Some mid-sized banks have also drastically cut risk provisions, but this has not helped their profits grow positively. LPBank, for example, has reduced its credit risk provisions by more than 20% in the past 6 months. TPBank has also cut this cost by more than half, from more than VND 1,400 billion in the first 6 months of 2022 to VND 683 billion. Without the reduction, TPBank's profit would have doubled -11%.

The reduction in provisions has caused the bad debt coverage ratio (LLR) of the above banks to drop sharply. For example, Bac A Bank decreased from over 204% at the end of last year to 158%; LPBank decreased from 142% to 78%; TPBank decreased from 135% to 61%; Saigonbank decreased from 47% to 44%; PGBank decreased from 38% to 36%...

In the context of rapidly increasing bad debt, the decline in the bad debt reserve buffer raises concerns about the banking system's ability to withstand risks in the coming time.

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