“Struggling” with bad debt
Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank – UPCoM: VBB) was established in 2006 with a charter capital of VND 200 billion, growing from a rural bank in Soc Trang. In July 2019, VietBank shares (stock code VBB) were officially traded on the UPCoM market.
After 18 years, from a bank with charter capital meeting the minimum level required by the State Bank, VietBank today is still among the banks with the lowest charter capital in the system.
Specifically, in the audited consolidated financial statements for 2023, ending on December 31, 2023, the bank's charter capital is nearly VND 4,777 billion, only higher than some banks such as KienlongBank (VND 3,653 billion), BAOVIET Bank (VND 3,150 billion), SaigonBank (VND 3,080 billion) and PGBank (VND 3,000 billion).
In 2023, VietBank was approved by the State Bank and the State Securities Commission to offer 100.3 million shares to existing shareholders to increase its charter capital to VND5,780 billion through issuing shares to existing shareholders at a rate of 21%. The selling price of shares is VND10,000/share.
Immediately after receiving approval, the bank conducted the offering of shares from January 16, 2024 to February 28, 2024. However, the bank later extended the purchase period to March 22, 2024, citing the need to increase the likelihood of success. The bank has not yet announced the results of the offering.
The predecessor of the founding shareholders of VietBank were members of Mr. Nguyen Duc Kien's family (often called Mr. Kien). By 2019, Mr. Kien's group had divested a large amount of VietBank's shares.
Specifically, from December 6, 2018 to January 6, 2019, Mr. Nguyen Duc Kien sold all 6.61 million shares owned at VietBank, equivalent to 2.035% of the bank's charter capital.
At the same time, Mr. Kien's parents-in-law (Mrs. Nguyen Thi Kim Thanh and Mr. Dang Cong Minh) also sold more than 6.4 million shares out of a total of 7.4 million shares registered for trading. Accordingly, the above two individuals only hold 1 million VietBank shares.
After the divestment, the group of shareholders related to Mr. Kien only holds nearly 16 million shares at VietBank, equivalent to 4.64% of the bank's charter capital. Of which, (Mr. Kien's wife) holds nearly 15 million shares, equivalent to 4.608% ownership.
Regarding business performance, in 2019, since VietBank was listed on UPCoM, the bank recorded pre-tax profit of VND 613 billion, up 53% over the same period, reaching 114% of the plan.
However, the following year, the bank's pre-tax profit dropped 34% compared to 2019 to VND403 billion. The main reason was that net interest income dropped sharply by 53%, reaching only VND573 billion in 2020.
2021 is a milestone marking VietBank's total assets officially surpassing the 100,000 billion VND mark, reaching 103,780 billion VND at the end of the year.
Notably, since its listing, VietBank's bad debt has been continuously increasing. Specifically, in 2019, the bank's on-balance sheet bad debt was VND539 billion. The ratio of bad debt to outstanding customer loans increased from 1.25% in 2018 to 1.32%.
At the end of 2020, VietBank's bad debt was VND 785 billion, an increase of 46% compared to the beginning of the year. Accordingly, the ratio of bad debt to total outstanding loans increased from 1.32% to 1.75%.
By the end of 2021, the bank's bad debt balance last year increased sharply by 135% to VND1,845 billion, mainly increasing in group 3 debt (substandard debt) and group 4 debt (doubtful debt). The on-balance sheet bad debt ratio climbed straight from 1.75% to 3.65% and this ratio continued until the end of 2022.
Most recently, in 2023, VietBank recorded net interest income of nearly VND 2,000 billion, an increase of 10.4% compared to 2022. The bank reported pre-tax net profit of more than VND 812 billion, after-tax profit of VND 647 billion, an increase of 24% compared to 2022 thanks to a reduction in credit risk provisioning costs to VND 111.3 billion, a decrease of 63% compared to the previous year.
However, in 2023, VietBank set a pre-tax profit target of VND960 billion. Thus, by the end of the year, this bank had only achieved 85% of the set profit target.
As of December 31, 2023, VietBank's total assets were recorded at VND 138,258 billion, up 24% compared to the beginning of the year. Of which, deposits at the State Bank were VND 9,408 billion, up 5 times, deposits at other credit institutions were VND 26,548 billion, up 53% and customer loans were VND 80,754 billion, up 27% compared to the beginning of the year.
Regarding loan quality, at the end of the year, VietBank's total bad debt was over VND2,071 billion, down 11% compared to the beginning of the year. As a result, the bad debt ratio decreased from 3.65% at the beginning of the year to 2.56%.
The thread closely linked to Hoa Lam
Regarding the leadership, most recently, the Board of Directors of VietBank dismissed Ms. Tran Thi Lam - Chairwoman of Hoa Lam Group from the position of Deputy General Director according to her personal wishes.
Speaking of Hoa Lam Group, the shadow of this enterprise has been present at VietBank since its early days. Right on its website, Hoa Lam informed: “In 2006, Hoa Lam began participating in the financial market when investing a large amount of capital in Vietnam Thuong Tin Bank. This is also a way for Hoa Lam Group to consolidate and expand its strong financial potential”.
Hoa Lam Group started operating in 1993 under the name Nhat Nguyen Transport Service Trading Company Limited, founded by Mr. and Mrs. Duong Ngoc Hoa and Tran Thi Lam.
In 2004, the company was transformed into Hoa Lam Investment and Development Joint Stock Company, along with the establishment of Hoa Lam - Kymco joint venture specializing in manufacturing and trading Kymco scooters. In 2006, Hoa Lam Group expanded into the financial sector by investing in Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank).
In addition, Hoa Lam Group also operates in the healthcare sector with projects such as Hoa Lam - Shangri-la High-Tech Economic Zone, City International Hospital, City International General Clinic and Hoa Lam International Hospital, Gia An 115 Hospital...
Currently, Hoa Lam Group also invests in a number of real estate projects in the center of Ho Chi Minh City, including Lim Tower 1 and 2, VietBank building, residential area 2 - 3 - 4, Thanh My Loi ward (District 2).
Introduction of Hoa Lam Group.
Currently, Mr. Duong Nhat Nguyen, son of Ms. Tran Thi Lam, is the Chairman of the Board of Directors of VietBank. Previously, Mr. Duong Ngoc Hoa, Ms. Lam's husband, also held the position of Chairman of the Board of Directors of the bank until 2021.
According to the 2023 management report, the family shareholder group of VietBank's Chairman currently owns 11.73% of VietBank's charter capital. Of which, Mr. Duong Ngoc Hoa holds 4.55% of capital, Mr. Duong Nhat Nguyen holds 3.36%, daughter Duong Mai Anh holds 2.1% and Duong Bao Anh holds 1.7%.
In the latest development, in January 2024, Mr. Duong Nhat Nguyen, Chairman of the Board of Directors of VietBank, purchased 7 million VBB shares on January 10. After the transaction, Mr. Nguyen successfully increased his ownership from 16.05 million shares, equivalent to 3.36%, to 23.05 million shares, equivalent to 4.83%.
The relationship between VietBank and Hoa Lam is further demonstrated through a series of mortgaged assets of businesses in the Hoa Lam ecosystem at the bank.
Since the beginning of 2023, the bank has approved the granting of credit to City International Hospital Company Limited and the transaction with Hoa Lam Shangri La Medical Company Limited, secured by land use rights and all works on the land at Lot No. 14, TBĐS, Binh Dong B Ward, Ho Chi Minh City of City International Hospital.
On April 4, 2023, VietBank's Board of Directors also approved the transaction with Hoa Lam Shangri La Medical Company Limited to guarantee the credit facility of Tan Dung Company Limited with the collateral being the land use rights of 8 land plots including 1-10, 1-11, 1-12, 1-17, 1-18, 1-19, 2-2, 2-3 of Hoa Lam Shangri La Medical to guarantee the outstanding debt worth 229 billion VND.
On June 29, 2023, VietBank continued to approve the provision of credit to TML Riverside Company Limited, secured by a series of land use rights and real estate of Hoa Lam Shangri La Medical Company Limited.
Accordingly, the land use rights at plot number 1-15; map sheet number 108, Binh Tri Dong B ward, Binh Tan district, Ho Chi Minh City guarantee a credit of nearly 492 billion VND.
Real estate at plots 1-10, 1-11, 1-12, 1-17, 1-18, 1-19, 2-2, 2-3 on map sheet 18, Binh Tri Dong B ward, Binh Tan district, Ho Chi Minh City owned by Hoa Lam Shangri La Healthcare guarantees a credit of nearly 1,665 billion VND.
On July 20, 2023, VietBank also approved a credit transaction with a total amount of VND 176 billion between the bank and City International Hospital Company Limited and the commitment of Hoa Lam Shangri-La Medical Company Limited.
Hoa Lam Shangri-La Healthcare Company Limited is a joint venture between Hoa Lam Group (Vietnam) and Shangri-La Healthcare Investment Pte. Ltd (Singapore) to provide healthcare services to the people of Ho Chi Minh City and surrounding areas. The company is the owner of City International Hospital Company Limited.
TML Riverside Company Limited was established in 2013, the main business lines of this company are hospitals and medical stations. Both TML Riverside and Hoa Lam Shangri La Medical are enterprises belonging to the ecosystem of Hoa Lam Group .
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