Restructuring core operations

Besides the information about paying huge dividends and business results reaching profits of tens of thousands of billions of VND, the "health" of many joint stock commercial banks in the bottom group or banks that have to be forced to transfer have initially had good results, which is a positive signal for the banking system, the main capital supply channel for the economy.

This year's shareholder meeting season has seen positive signs from many banks struggling to restructure. According to information from the National Commercial Joint Stock Bank (NCB), after issuing additional shares to increase its charter capital to nearly VND11,800 billion in 2024, this year, the bank plans to continue to increase its capital by VND7,000 billion, raising its charter capital to VND18,780 billion. According to NCB's board of directors, charter capital is one of the important criteria that determines the safety level of a bank's operations as well as its ability to develop sustainably in the future.

"Increasing charter capital not only helps the bank expand its scale of operations, improve its financial capacity and resilience to market risks, but also plays a key role in successfully implementing and accelerating the implementation of the restructuring plan for the period 2023 - 2025, and orientation to 2030 of NCB", said NCB leaders.

It is known that in 2024, NCB's restructuring process recorded positive signals when the bad debt ratio as of December 31, 2024 decreased significantly; total assets as of December 31, 2024 increased compared to the end of 2023 and reached 118.5 trillion VND, up 23.1% compared to 2023 and exceeding the plan by 12%. Total outstanding loans reached nearly 71,175 billion VND, exceeding the plan by 10.6%. Total capital mobilization from market 1 to December 31, 2024 reached 100.4 trillion VND, up 25.5% over the same period and exceeding the plan by 16.8%.

However, the provisioning, divestment of accrued interest and capital expenditure of old existing accounts according to the restructuring plan roadmap is the reason why 2024 profit recorded a negative level, although the bank's new business development activities in 2024 achieved very remarkable results with total net operating income (TOI) after risk provisions from new business activities of VND 2,968 billion.

According to economic experts, profit is not the decisive factor to measure the health of a bank, especially in the context of the whole system having had periods of overheating growth in the past 10 years. Stability and safety for sustainable development from within are what banks need, especially those banks that have to be transferred to other banks or restructure themselves after seeing "loopholes" in management.

NCB's restructuring process has recorded positive signals. Photo: Duy Minh

Another bank that has also been quite successful in restructuring its operations in 2024 is the Prosperity and Development Joint Stock Commercial Bank (PGBank). The bank has strongly implemented restructuring activities to improve business efficiency, increase competitiveness and build a sustainable motivation mechanism for its staff. Mr. Tran Van Luan, Permanent Deputy General Director of PGBank, informed: "We have promoted restructuring the credit portfolio, optimized capital use efficiency, strictly controlled credit quality, helping to reduce the ratio of bad debts on the balance sheet. The bank also prioritizes the handling and recovery of bad debts and off-balance sheet debts; at the same time, promoting capital and foreign currency trading, making the most of market opportunities to increase profits, improve operational efficiency and expand the banking service ecosystem".

Providing more information about the system restructuring process, Mr. Luan said that PGBank has changed its operating and management mechanisms, focusing on improving competitiveness by streamlining the organization, optimizing processes, developing human resources through specialized training and reasonable compensation mechanisms. In addition, the bank also focuses on promoting digital transformation, deploying multi-channel banking platforms, and applying digital technology to the operating process.

“The results achieved reflect the effectiveness of the restructuring process: In 2024, total assets increased by 32%, capital mobilization increased by 21%, profit after risk provisioning grew by 44.1% compared to 2023, total bad debt recovery reached VND 1,861 billion, of which, recorded income reached VND 363 billion. This is an important foundation for PGBank to continue to make breakthroughs in the next stages,” Mr. Luan expressed.

Expect changes from transfer banks

January 2025 saw the final “deals” of banks subject to mandatory transfer to “sponsor” banks, under the direction of the State Bank. Specifically, DongA Bank to HDBank and GPBank to VPBank. Previously, in December 2024, CB was transferred to Vietcombank and Oceanbank to MB. Before the transfer, the four banks were under special control of the State Bank after many years of accumulating significant bad debts and accumulated losses.

Four weak banks have been successfully transferred. Photo: Duy Minh

After the transfer, some banks changed their names, some kept their old names, but all aimed to change for the better. Assessing the general situation of banks after the transfer and restructuring, Ms. Phan Thi Van Anh, MSc - Director - Senior Analyst of VIS Rating, said that large banks have enough resources to absorb and manage the operations of the transferred banks. Accordingly, banks participating in the State Bank's weak credit institution restructuring program have provided management and technical resources to the transferred banks to support the development of business strategies, policies and operating procedures.

“Specifically, each major bank sent experienced personnel to take over key positions including Chairman of the Board of Directors and CEO at the transferred banks. The major banks also renamed the transferred banks similar to the parent bank and converted the model into digital banks,” VIS Rating experts commented.

It is known that during the restructuring process after receiving the transfer, some banks have plans to inject new capital into the transferred banks after accumulated losses have been reduced or completely resolved. Specifically, VPBank has announced a plan to contribute up to VND16,000 billion to GPBank; MBBank has announced a plan to inject VND5,000 billion into Oceanbank within 7-8 years of the restructuring plan; HDBank plans to inject VND9,000 billion into DongABank after the bank reduces accumulated losses. Analysts believe that a stronger capital buffer will help improve the solvency and recovery of the transferred banks against future shocks, increasing market confidence in the ability of the restructured banks to continue operating.