Nineteen out of 26 banks report positive profit growth

Most Vietnamese banks have announced positive after-tax profit growth in the first quarter of this year, but bad debt is increasing sharply.

Leading Vietnamese lender Vietcombank maintained the top position in terms of Q1 after-tax profit with VND8.99 trillion ($383.37 million), up nearly 13% year-on-year.

Vietcombank's profit growth in the period came from the positive performance of its core business and reduction of credit provisions. The bank's net interest income rose more than 18.6% to VND14.2 trillion ($605.42 million).

Net profit from forex trading increased by 12.1%, reaching VND1.71 trillion ($72.74 million). Other business activities brought the bank VND1.08 trillion ($46.17 million), 2.2 times higher year-on-year.

Following Vietcombank, BIDV recorded after-tax profit of VND5.56 trillion ($237 million), up nearly 53% compared to Q1/2022.

After focusing on provisioning, BIDV, the largest bank in terms of assets (more than VND2,100 trillion or $89.46 billion) is gradually returning to the profit race.

Vietcombank and BIDV are state-controlled commercial banks and listed on the Ho Chi Minh Stock Exchange as VCB and BID.

State-controlled Military Bank (MB Bank) ranked third, with a post-tax profit of VND5.02 trillion ($214.16 million), up nearly 10.5% year-on-year. The main growth driver of this bank came from the reduction of provision for risks. MB Bank's Q1 provision was nearly VND1.85 trillion ($78.87 million), down 13%.

Apart from net interest income with a growth of 22%, MB Bank's remaining business segments all declined. Its net profit from service activities was only VND690 billion ($29.4 million), down 38.2%, partly due to a decrease in income from insurance.

Net profit from trading securities reached VND37 billion ($1.58 million), down 62.8%; net profit from securities trading and capital contribution as long-term investment decreased by nearly 87% to only VND135 billion ($5.76 million). Net profit from forex trading and other activities decreased by 20.8% and 13% respectively.

MB Bank's bad debt ratio at the end of the period climbed to 1.75%, a sharp increase from 1.09% at the end of 2022.

Meanwhile, VietinBank, one of the “Big 4” banks in Vietnam, ranked fourth with after-tax profit of VND4.83 trillion ($205.97 million), up nearly 3%.

Notably, the runner-up for many consecutive years, Techcombank, dropped to fifth place. In Q1, the private bank's after-tax profit reached VND4.54 trillion ($193.4 million), down nearly 19.2%.

The next positions belong to ACB with post-tax profit of VND4.14 trillion ($176.29 million), up nearly 26%; SHB with VND2.88 trillion ($122.8 million), up 11.6%; VIB with VND2.16 trillion ($91.88 million), up 18.21%; and Sacombank with VND1.9 trillion ($81 million), up 49.14%.

VPBank, Vietnam’s largest bank by charter capital, dropped to 10th position due to the absence of extraordinary income as in Q1/2022, while the cost of capital was pushed up and provisioning increased by 55% due to a sharp increase in bad debt. As a result, VPBank recorded after-tax profit of VND1.65 trillion ($70.35 million), down nearly 82%.

Banks with the lowest profit were National Citizen Bank (NCB) with VND4.4 billion ($187,600), down 78.4%; Viet Capital Bank VND20.3 billion ($865,500), down 85.4%; and SaigonBank VND99.6 billion ($4.25 million), up 2.47%.

In terms of growth rate, standing at the top is VietBank with after-tax profit of VND157.6 billion ($6.7 million) in Q1, up 75.11%, followed by Kien Long Bank with VND161.5 billion ($6.88 million), up 59.6%; BIDV up 52.8%, and Sacombank up 49.14%.

Theinvestor's statistics recorded seven banks seeing negative growth in Q1, including Viet Capital Bank (-85.4%), VPBank (-81.5%), NCB (-35,28%), Techcombank (-19.18%), SeABank (-18.59%), and LienVietPostBank (-12.53%).

On average, the after-tax profit of 26 banks in the first quarter of 2023 only increased slightly by 4.42%.

Although most banks reported good growth in after-tax profit in Q1, this group's bad debt increased sharply. At the end of Q1/2023, bad debts (debts of groups 3, 4, 5) of these banks reached more than VND167.92 trillion ($7.16 million), an increase of 24.18% compared to the beginning of the year.

Yuanta Securities noted that the bad debt ratio of the entire banking industry would increase slightly in 2023 due to the expiration of Circular No. 14/2021/TT-NHNN on the repayment schedule and risks from the world macro-economy that could negatively affect Vietnam's economic growth prospects. In addition, bad debt may also increase due to problems related to the real estate sector, when the lending rate in this field of many banks is quite high.

The increase in bad debt ratio will obviously create many difficulties for banks' profit growth. Accordingly, this factor will lead to an increase in provision for credit risks in 2023 and directly affect the bank's profit outlook. Especially, with banks holding a large loan ratio in the real estate sector, these loans may become bad debts if capital inflows into this sector continue to be tightened.

However, credit risk will be differentiated among credit institutions, in which banks with high real estate credit balance will face greater provisioning pressure than net retail banks.