Potential bad debt at TPBank doubled

Profits plummet

Tien Phong Commercial Joint Stock Bank (TPBank) has just announced its financial report for the fourth quarter of 2023 with many indicators going backwards.

Accordingly, TPBank's after-tax profit in the fourth quarter of 2023 was only VND 493 billion, down VND 1,026 billion, equivalent to 67.5% compared to the fourth quarter of 2022; the accumulated profit for the whole year reached VND 4,463 billion, down VND 1,798 billion compared to the previous year, equivalent to 28.7%.

Explaining the fluctuations in business results during the period, Mr. Le Quang Tien - Vice Chairman of the Board of Directors, representative of the organization (authorized person to disclose information) - said that in the context of the business situation of enterprises not being stable and not having much improvement, along with TPBank implementing many preferential policies on interest rates and implementing measures to reduce interest rates, exempting fees to support businesses and individuals with a reduction of thousands of billions of VND, leading to the bank's business results not achieving the expected results.

However, data in TPBank's financial report shows that net interest income (mostly income from loan interest) is still growing quite well.

Meanwhile, TPBank “shifted into reverse” when service activities grew negatively, other activities suffered losses, and especially, TPBank had to allocate a huge budget for provisions. Provisions increased dramatically when TPBank’s bad debts increased sharply.

Specifically, interest income and similar income in the fourth quarter of 2023 reached VND 7,753 billion, an increase of VND 1,730 billion, equivalent to 28.7% compared to the fourth quarter of 2022; the accumulated income for the whole year increased from VND 21,811 billion to VND 28,559 billion.

Interest expense and similar expenses in the fourth quarter of 2023 increased by VND514 billion, equivalent to 15.8% to VND3,757 billion; the total for the year reached VND16,135 billion, up from VND10,424 billion in 2022.

It can be seen that despite participating in reducing lending interest rates to support businesses and individuals, TPBank still recorded an increase in interest income and similar income, even increasing more strongly than interest expenses.

As a result, the bank's net interest income still increased by VND 1,216 billion, equivalent to 43.7% to VND 3,996 billion in the fourth quarter of 2023; the accumulated whole year increased from VND 11,387 billion to VND 12,425 billion.

Therefore, it can be seen that lending activities are not the factor that makes TPBank "go backwards". This bank's profit decreased sharply when net profit from service activities decreased by 702 billion VND, equivalent to 86% to only 114 billion VND in the fourth quarter of 2023; the accumulated profit for the whole year decreased from 2,692 billion VND to 2,279 billion VND.

Meanwhile, other activities caused TPBank to lose 41.8 billion VND in the fourth quarter of 2023; the accumulated loss for the whole year was 105 billion VND.

Most notably, TPBank used an unusually high budget for provisions. The cost of credit risk provisions in the fourth quarter of 2023 was VND 1,970 billion, an increase of VND 1,855 billion, equivalent to 1,613%; the total for the year reached VND 3,946 billion, an increase of VND 2,102 billion, equivalent to 114% compared to 2022.

Bad debt doubles

It can be seen that the sudden increase in credit risk provisioning costs of 1,613% is one of the main reasons for the sharp decline in net profit at TPBank. TPBank has to allocate a large budget for provisioning because bad debts and debts with the potential for capital loss at this bank have reached a record.

Specifically, as of December 31, 2023, bad debt at TPBank amounted to VND 4,200 billion, accounting for 2.05% of total outstanding credit; an increase of VND 2,843 billion, equivalent to 210% in absolute value and increased. The bad debt ratio increased sharply from 0.84% ​​in 2022 to 2.05%.

Most notably, bad debt increased by VND610 billion, equivalent to 121% compared to the end of 2022, to VND1,115 billion.

This is the highest level of bad debt and debt with potential loss of capital at TPBank in recent times.

It should be emphasized that with a 210% increase, in 2023, TPBank's bad debt will grow at a faster rate than the 28.3% increase in credit.

Compared to the previously set plan, TPBank has completed the target on bad debt ratio. Previously, TPBank's annual general meeting of shareholders approved the plan to reduce the bad debt ratio to below 2.2%.

However, pre-tax profit was much lower than planned. Shareholders expected the bank's pre-tax profit in 2023 to be VND8,700 billion (equivalent to an increase of 111%), but the actual figure was only VND5,589 billion, 35.8% lower than planned.