An Binh Commercial Joint Stock Bank (ABB) Bad debt escalates, profit plummets 94%

Rising bad debt is one of the hot spots in the banking industry in the first half of this year. The real estate market crisis and the impact of the disruption of some capital mobilization channels have caused difficulties for many businesses, and banks are also not immune to the impact.

However, among the banks affected by the increase in bad debt, there are quite a few names that have made a breakthrough. One of them is An Binh Commercial Joint Stock Bank - An Binh Bank (code ABB). This bank has recorded a sharp decline in profits, accompanied by a sharp increase in the scale of bad debt (group 3-5 debt). ABB's bad debt coverage ratio is also low compared to the general level, although this bank has increased its provisions.

Risk contingency plan increases suddenly under pressure of bad debt, ABBank's 6-month profit drops sharply by nearly 60%, picture 1 — Second quarter profit dropped 94%, bad debt of An Binh Commercial Joint Stock Bank (ABB) increased to 61% (Photo TL)

6-month profit drops sharply due to risk provision costs

According to the audited financial report for the second quarter of 2023, ABBank recorded net interest income of VND 776.5 billion, down 20.4% over the same period last year.

Profit from service activities increased but this result did not offset the decline in some other business segments. In particular, foreign exchange business recorded net profit only half of the same period, down from 486.2 billion to only 236.6 billion.

Net income from trading investment securities and other activities improved, but this figure was not enough to offset the decline in the main business segments. As a result, ABB's total operating income in the first half of this year was just over VND2,580 billion, compared to VND2,800 billion in the first half of 2022.

Despite the decline in business activities, ABB's operating expenses still recorded an increase of more than 17%. In particular, the cost of credit risk provisions increased dramatically, nearly fourfold, to more than VND800 billion.

This result caused ABBank's after-tax profit in the first half of this year to reach just over VND540 billion, down nearly 60% compared to the same period last year. In particular, according to the bank's self-made report for the second quarter, the bank's net profit decreased by 94%.

Bad debt increased by 61%

One of the reasons affecting ABBank's business results is the sudden increase in credit risk provisioning costs, from 173.9 billion to 697.9 billion VND in the second quarter. In the first 6 months of the year, this bank set aside more than 800 billion VND in provisions, compared to more than 200 billion VND in the same period last year.

According to the audited financial statement, ABBank said that standard debt (group 1) in the period reached VND77,129.1 billion; debt requiring attention (group 2) reached VND3,071.1 billion; substandard debt (group 3) reached VND1,385.3 billion; doubtful debt (group 4) reached VND1,311.4 billion; debt with potential loss of capital (group 5) accounted for VND1,123.6 billion.

Notably, group 2 debt nearly doubled, group 3 and group 4 debt also increased from 156.3% to 211.7%. Group 5 debt decreased slightly by nearly 20%.

An Binh Bank's total bad debt at the end of the second quarter was VND3,820 billion, up 61% compared to the beginning of the year. As mentioned above, the increase in debt mainly came from bad debt in groups 3 and 4.

ABB's customer loan risk provision as of the end of the second quarter was VND1,282 billion, a slight increase of 25% compared to the beginning of the period. However, this provision figure is only equivalent to 33.6% of the bad debt scale as of the end of the second quarter, meaning that ABB has only covered more than 1/3 of the recorded value of group 3-5 debt.

Minh Nhat - Du Uyen

Over the years, ABBank has continuously guaranteed real estate projects of companies related to a multi-industry corporation, typically: HTL Vietnam Company - Investor of a project in Hoang Mai District, Hanoi ; Tan Hoang Cau Company - Investor of the PeakView Tower office building project at 36 Hoang Cau, Dong Da District, Hanoi...

The above-mentioned group has been a very active name in recent years, mobilizing nearly VND 6,500 billion in bonds through 54 issuances, mostly concentrated in 2020. If including related parties, businesses related to the "giant" of this group have mobilized a total of VND 16,422.7 billion in bonds from 2019 to present.

In 2022, this group has stepped up the purchase of bonds before maturity. Specifically, Van Huong bought back all VND 1,499.6 billion of DRGCH2123005 bonds, HTL Vietnam bought back VND 434 billion of HLNCH2124001 bonds. In addition, many of the group's bonds also mature in 2022 with a total value of VND 1,978 billion.

In 2023, a number of bonds of the group and related companies will mature, including lot 1,497.3 billion VND, GLH2014001 (500 billion VND) and GLH2014002 (500 billion VND).

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