ABBank business declines, bad debt skyrockets

ABBank's total bad debt increased by 35% after the first quarter of the year to nearly VND3,200 billion, equivalent to a bad debt ratio that skyrocketed from nearly 3% to over 4%, exceeding the regulations of the State Bank of Vietnam (SBV).

2022 profit declines, not meeting plan

At the 2023 Annual General Meeting of Shareholders, An Binh Commercial Joint Stock Bank (ABBank - code ABB) set a target of pre-tax profit increasing by 68% compared to 2022 to VND 2,826 billion. The ambitious plan was set by this bank after a year of business decline and failure to meet the set target.

In 2022, ABBank's net interest income reached VND3,735 billion, up 22% over the previous year. Meanwhile, non-interest income decreased, such as service income decreased by 34% (to VND232 billion), and foreign exchange income decreased by 53% (to VND193 billion). Notably, other activities earned a profit of more than VND415 billion, up 62%.

On the other hand, operating expenses increased by only 8% over the same period to nearly VND2,043 billion. During the year, ABBank set aside nearly VND777 billion to reserve for credit risks. As a result, the bank only earned more than VND1,702 billion in pre-tax profit, down 13% over the previous year. Compared to the plan of VND3,079 billion in pre-tax profit set for the whole year of 2022, ABBank has only achieved half of the target.

ABBank explained that due to the impact of inflation, many expenses increased compared to 2021 and the proposed plan. In addition, last year, government bond trading activities encountered difficulties due to rising interest rates and fluctuations in foreign exchange rates, causing adverse impacts. At the end of the year, ABBank carried over the balance of its foreign currency trading account to ensure compliance with the regulations of the State Bank as well as adjusted its investment portfolio, which affected the whole year's profit. Therefore, ABBank has not met expectations compared to the 2022 plan approved by the General Meeting of Shareholders.

After the growth streak ended last year, investors could not help but question ABBank's ability to fulfill its ambitious plan in 2023. In the first quarter of the year, the bank's pre-tax profit increased only slightly by 6.3% over the same period, reaching VND611 billion, mainly thanks to non-interest income. However, it must be emphasized that income from foreign exchange, securities trading, financial investment, etc. are all unsustainable, highly dependent on market fluctuations, and pose many risks. Credit quality declines, bad debt soars In the context of declining business, ABBank's credit quality has also clearly declined. From the level of bad debt (substandard debt, doubtful debt and debt with the possibility of losing capital) of less than VND 1,000 billion at the end of 2018, this number has continuously increased every year and reached nearly VND 2,400 billion at the end of 2022, which is 2.4 times after 4 years. The ratio of bad debt to outstanding credit also increased from less than 2% at the end of 2018 to nearly 3% at the end of last year. Notably, this situation did not improve in the first months of this year, and even became more serious when the bad debt ratio skyrocketed to more than 4%, exceeding the regulations of the State Bank.

In the first quarter of 2023, ABBank's total bad debt continued to increase by 35% after the first quarter to nearly VND 3,200 billion. Of which, substandard debt at the end of the first quarter doubled compared to the beginning of the year to VND 1,128 billion. Doubtful debt also increased by VND 265 billion, equivalent to more than 63% compared to the beginning of the year. On the other hand, debt with the possibility of losing capital decreased slightly to VND 1,384 billion, but still accounted for the largest proportion of total bad debt with more than 43%. Bad debt increased while ABBank's credit scale was narrowed. Outstanding loans to customers at the end of the first quarter decreased by 3.1% to VND 79,453 billion. As of March 31, ABBank's total assets were at VND 134,282 billion, up 3.2% compared to the beginning of the year. Of which, deposits at the State Bank decreased by 47% to VND1,422 billion, deposits at other credit institutions increased by 38% to VND28,025 billion. Customer deposits decreased by 10.3% to VND75,429 billion.

Minh Nhat

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