Mr. Ngo Chi Dung: Participating in the 'zero-dong bank' structure for the purpose of increasing scale

From a financial perspective, according to the Chairman of VPBank, no bank is eager to participate in the zero-dong banking structure, but VPBank has its own goals to achieve.

This was shared by Mr. Ngo Chi Dung, Chairman of the Board of Directors of Vietnam Prosperity Bank (VPBank) at the shareholders' meeting this morning, in response to a question about participating in the "zero-dong bank" structure - banks under special control, bought by the State Bank at zero dong due to negative equity.

The market has 4 organizations in this category, including Ocean Bank, Construction Bank (CBBank), Global Petroleum Bank (GPBank) and DongA Bank (DongABank).

"Why did VPBank participate in the restructuring of zero-dong banks?", a shareholder asked. According to VPBank's Chairman, in terms of financial and management capacity, not every bank is eligible to participate in the restructuring of zero-dong banks. Especially when these banks are recording large accumulated losses and continuously operating at a loss.

"Simply from a financial perspective, most banks are not keen on participating in restructuring," said Mr. Dung, but added that VPBank participated for other purposes.

According to him, the participation of strategic shareholder SMBC helps VPBank have a large capital base, capable of participating. This restructuring does not bring financial benefits but helps the bank accelerate its expansion strategy. In particular, credit growth at a higher scale and the ability to open "foreign room" of over 30% are the benefits that VPBank aims for.

"Currently, banks are only allowed 30% foreign room, but VPBank has investors who want to increase the ratio. By participating in the zero-dong bank restructuring, the bank can open the room to more than 30%, which is an important condition for VPBank to increase its scale and raise capital," said Mr. Dung. In addition, participating in the restructuring also helps the banking system to be better, which is considered by VPBank's leaders as a necessary contribution.

VPBank leaders at the annual meeting held on the morning of April 29. Photo: VPB — VPBank leaders at the annual meeting held on the morning of April 29. Photo: *VPB*

In 2023, VPBank failed to achieve its profit target. The bank recorded a pre-tax profit of nearly VND14,000 billion , 80% of the plan. However, FE Credit lost nearly VND3,700 billion, causing consolidated profit to drop sharply.

According to General Director Nguyen Duc Vinh, the weak recovery of the economy, the three crises of liquidity, bonds and the real estate market are objective factors that negatively affect the operating results. In addition, FE Credit is considered a "dark spot".

This finance company is facing difficulties due to the double impact of Covid-19 and the decline in economic consumption. During the Covid-19 period, more than 60% of FE Credit's customers were affected, many workers were no longer able to repay their debts, leading to an increase in bad debt rates. In the past two years, the prevention of illegal lending and black credit has affected debt collection at some consumer finance companies. In 2023, FE Credit's debt collection decreased by 50%.

However, since the fourth quarter of last year, FE Credit's operations have recovered. According to VPBank's CEO, the finance company's loan growth reached more than 20% in the fourth quarter of last year and increased by another 20% in the first quarter of this year. The bad debt ratio also decreased to below 20%.

Regarding real estate lending, VPBank Chairman Ngo Chi Dung assessed that this sector "is still a safe field, if controlled and properly evaluated".

VPBank's real estate and construction lending ratio is currently more than 19% of total outstanding loans. For the homebuyer lending segment, outstanding loans are about 16%. "VPBank is currently one of the largest home loan banks in the market, with about VND90,000 billion," said VPBank's CEO.

This year, VPBank has set an ambitious plan with a consolidated profit target of more than double that of last year, reaching more than VND23,000 billion. Of which, the parent bank's profit is expected to be more than VND20,700 billion. FE Credit is expected to contribute VND1,200 billion, VPBank Securities (VPBankS) more than VND1,900 billion and OPES Insurance VND873 billion.

CEO Nguyen Duc Vinh said the bank will focus on growth in the strategic segment of individual customers and SMEs, while seeking development opportunities in the FDI customer segment.

Minh Son

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