Research on the impact of loan portfolios on profitability of joint stock commercial banks

In addition, according to the Basel committee, when comparing the outstanding balance of an industry with the equity level of a bank at the same time, it will also assess the concentration of risk of the portfolio. The data on the annual reports of joint stock commercial banks show that at different times, the outstanding loans of a certain industry can exceed the equity level at the same time many times. Typically, in 2006, ACB's lending to the community for personal services was 4 times higher than equity, while Vietinbank's lending to processing industry was 5 times higher than equity in 2009, Vietcombank's production and processing activities were faster. 4 times equity.That is a manifestation of very large portfolio risk because as we know that the proportion of loans usually accounts for a very high proportion of the total assets of these banks and at the same time, credit interest income accounts for the total operating profit. also accounted for a very large proportion.

Below is a table showing the ratio of outstanding loans of some industries to equity representing the very large portfolio risk of some large banks.

Table 3.8: Proportion of outstanding loans of an industry to equity

Unit: Million VND

CTG	2004	2005	2006	2007	2008	2009	2010	2011	2012	two thousand and thirteen	2014
Commerce	13,876.228	23,869,089	28,369,731	21,594,964	22,632,090	34,429,682	27,138,852	34,466.215	97,095,238	107,208,518	126,330,108
Agriculture and Forestry	5,662.755	6,568,796	4,067,697	4,284.351	3,885,097	5,309,319	3,998,167	9,112,689	8,301,832	11,284,962	14,810,445
Production and processing processing	21,270,873	25,932,993	23,009,259	36,766,934	46,853,971	62,422,856	89,689,763	130,685,351	153,421,113	178,220,363	197,791,582
Construct	8,944.213	10,375,287	10,729,148	10,851,994	13,565,930	17,885,395	26,761,802	31,847,519	22,774.338	26,714,044	37,885,479
Personal and community service	0	0	0	11,451,945	12,771,385	11,124,520	57,544,064	45,376,493	5,163,221	7,537.839	13,114,180
Warehousing, transportation and communication	7,008,457	4,313,849	4,723.005	8,371,873	11,460,130	15,280,939	17,249,959	17,178,465	1,755,920	1,531,201	8,776,153
Education and training	0	0	0	367.208	304,884	402.623	972,029	80,208	968,304	786,232	707.717
Consulting and real estate business estate	0	0	0	164,019	363.331	1,142,348	3,351,458	9,076,515	26,068,597	24,801,326	27,200,777
Restaurants and hotels	0	0	0	2,571,687	2,883,230	4,320,722	4,846,514	3,168,270	2,291,814	2,415,838	3,231,545
Financial services	0	0	0	607,434	409,820	641.464	1,549,524	422,625	479	34.353	69.581
Other professions	7,396,996	3,572,257	9,253,494	5,158,231	5.622,134	6.553.422	1,201,677	10,640,606	5,734.657	7,671,503	9,951,460
total	64,159,522	74,632,271	80,152,334	102,190,640	120,752.073	163,170,485	234,204,809	293,434,312	333,356,092	376,288,968	439,869,027
VCSH	4,908,773	4,999,839	5,637,625	10,646,529	12,336.159	12,572,078	18,170,363	28,490,896	33,624,531	54,074.666	55,012,808
Industry ratio (3)/Equity	4.33	5.19	4.08	3.45	3.80	4.97	4.94	4.59	4.56	3.30	3.60
VCB	2004	2005	2006	2007	2008	2009	2010	2011	2012	two thousand and thirteen	2014
Commerce	27,866,687	16,201,654	17,484,141	18,560,451	24,990,989	35,928,224	38,862,585	46,445,516	53,528,805	80,800,074	94,640,746
Agriculture and Forestry	5,432,318	2,615,889	1,979,700 won	3,614,146	2,414.403	1,944,886	2,071,144	2,445,791	4,765.988	6,172,905	7,629,908

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Production and processing	11,647,332	23,618,936	27,311,528	51,952,889	57,742,660	71,525,045	89,235,796	106,949.548	120,341,779	129,107,675	149,102,895
Construct	2,140,626	3,474.629	3,982,156	6,351,442	7,552,473	11,144,304	10,479,503	12,840,564	14,083,060	15,392,873	16,391,604
Personal and community service	0	0	0	0	0	0	0	0	0	0	0
Warehousing, transportation and communication	620,820	2,019,377	2,874,388	5,923,301	7,434,487	10,416,625	12,167,693	11,803.491	12,396,866	10,217.873	15,175,476
Education and training	0	0	0	0	0	0	0	0	0	0	0
Real estate consulting and business	0	0	0	0	0	0	0	0	0	0	0
Restaurants and hotels	605,135	1,429,339	1,680,267	3,305,780	2,843,598	30,425.668	3,960,130	5,433,282	6,025,950	7,139,014	8,806,821
Financial services	0	0	0	0	0	0	0	0	0	0	0
Other professions	5,291,629	11,684,157	12,430,339	7,823,885	9,814.355	7,619,474	20,028,055	23,499,441	30,024.860	25,483,795	31,584,587
total	53,604,547	61,043,981	67,742,519	97,531,894	112,792,965	141,621,126	176,813,906	209,417,633	241,167,308	274,314,209	323,332,037
VCSH	7,180,787	8,416.426	11,127.248	13,551,546	13,790,042	16,710,333	20,736,729	28,638,696	41,546,850	42,386,065	43,350,720
Industry ratio (3)/Equity	1.62	2.81	2.45	3.83	4.19	4.28	4.30	3.73	2.90	3.05	3.44
BIDV	2004	2005	2006	2007	2008	2009	2010	2011	2012	two thousand and thirteen	2014
Commerce	0	0	8,893,619	16,362,024	24,007,860	32,854,989	39,778,455	58,977,336	67,883,744	88,416.206	103,096,421
Agriculture and Forestry	0	0	4,679,912	5,290,690	6,691.076	6,888,840	9,006,414	11,781,038	18,141,674	19,116,439	24,248,933
Production and processing	0	0	39,600,763	42,221,736	54,245,458	68,477,021	75,583.854	112,185,506	126,851,956	131,031.196	130,591,895
Construct	0	0	24,557.525	31,148,143	37,176,109	47,849,795	68,383,952	42,612,567	42,861,234	56,268,105	70,567,421
Personal and community service	0	0	10,072,222	15,578,430	15,505,003	16,425,059	27,778,223	32,252,942	0	0	0
Warehousing, transportation and communication	0	0	3,664,188	5,996,619	9,263,644	14,527,938	15.675,009	16,828,851	13,545,599	11,280,689	10,382,326
Education and training	0	0	200,348	204,504	209,989	329,412	494.664	652,463	275,201	224.626	224,025

Real estate consulting and business	0	0	1.891	885	0	0	0	1.621,136	23,387,246	27,887,821	31,623,292
Restaurants and hotels	0	0	3,929,218	5,482,946	8,767.875	9,682.714	6,352,833	2,377,462	10,172,872	11,947,166	13,210,517
Financial services	0	0	1,469,141	7,557,370	1,897,561	4,014,066	3,311,183	1,669,409	720,589	698,093	1,713,638
Other professions	0	0	1,570,011	2,140,207	3,217,945	5,352.074	7,462,988	14,599,546	36,083,553	44,164,110	60,034,546
total	0	0	98,638,838	131,983.554	160,982,520	206,401,908	254,191,575	293,937,120	339,923,668	391,035,051	445.693,014
VCSH	6,182,140	6.530,861	7,626.198	11,634.793	13,466,100	17,639,330	24,219,730	24,390,455	26,494,446	32,039,983	33,271,267
Industry/equity ratio			5.19	3.63	4.03	3.88	3.12	4.60	4.79	4.09	3.93
SCB	2004	2005	2006	2007	2008	2009	2010	2011	2012	two thousand and thirteen	2014
Commerce	0	0	124,591	737,572	794,957	735,826	795,036	0	2,542,875	1,591,130	2,451.043
Agriculture and Forestry	0	0	22,882	504,999 won	218,180	89,480	40,888	0	189,793	314.684	1,548,203
Production and processing	0	0	484.967	1,464,396	1,794,424	2,757,679	2,697,116	0	1,802,204	1,014,588	392,463
Construct	0	0	765,967	2,231,504	2,814,177	3.144,053	5,506,210	0	4,533,570	5,258,800	965,568
Personal and community service	0	0	5,917,915	12,793,188	14,976,382	18,645,836	17,450,574	0	7,138,809	10,783,792	45,536,659
Warehousing, transportation and communication	0	0	168.861	128,651	490,681	2,637.828	495,471	0	290,317	39,408	165,111
Education and training	0	0	7,941	78.255	328,958	633.448	659,477	0	536.664	253,596	252
Real estate consulting and business	0	0	162,587	278.701	665.136	907,185	3.802.235	0	8,264,988	8,878.459	10,799,954
Restaurants and hotels	0	0	348,174	276.116	301,554	963,950	1,010,934	0	481.605	473.731	7,143
Financial services	0	0		151,007	237.520	318,038	706.219	0	636,000 won	636,000 won	0
Other professions	0	0	14,077	833.216	656.287	477.166	13.493	0	61,738,075	59,759,511	72,159,045
total	0	0	8,017,962	19,477,605	23.278,256	31,310,489	33,177,653	0	88,154,900	89,003,699	134,025,441

VCSH	169,178	330,419	819,925	2,671,744	2,809,167	4.583,816	4,710,636	11,334,503	11,370,065	13,112,557	13,185,291
Sector ratio (5)/Equity			7.22	4.79	5.33	4.07	3.70	0.00	0.63	0.82	3.45
ACB	2004	2005	2006	2007	2008	2009	2010	2011	2012	two thousand and thirteen	2014
Commerce	1,162,612	1,990,939	5,124,972	8,012,741	8,175,846	19,831.560	27,586,762	36,550,927	33,197,034	27,095,125	28,220,351
Agriculture and Forestry	145,220	129.252	136.125	116.274	221,790	166,870	249,095	331.074	518,140	1,037,612	937,475
Production and processing	1,989,665	2,119,473	3,848,511	5,428,273	4,514,346	11,266,591	13,202,929	14,738,551	13,270,504	20,896,900	21,186,829
Construct	200,805	318,852	429,966	722,166	946,652	2,373,316	3,534,433	4,827,444	3,343,992	3,806,157	4,279,018
Personal and community service	2,789,251	3,621,374	6,621,287	14,984,250	17,709,042	22,939,329	33,408,347	35,275,324	43,692,871	45,312,225	0
Warehousing, transportation and communication	118,461	269,963	377,576	763,208	739,817	1,756,208	2,600,582	3,016,162	2,386,365	3,150,961	2,791,264
Education and training	2.088	30,968	45,274	58.545	2.595	31.255	80,160	105,762	101.094	116.841	146.458
Real estate consulting and business	199,823	190,719	150,213	360,108	608,307	519,614	1,276,296	1,449,056	1,079,051	2,205,845	2,265,001
Restaurants and hotels	44.433	68,568	175,542	354,585	493,586	997.745	1,474,081	2,174,478	1,816,546	1,707,964	1,934.505
Financial services	503	5.135	80,836	5,620	4,300	630,766	667,142	703.228	631,529	100	246,055
Other professions	45,576	636,274	24,117	1,005,087	1,416,419	1,844,724	2,568.137	2,725.627	2,777,722	1,860,291	2,046,320
total	6,698,437	9,381,517	17,014,419	31,810,857	34.832,700	62,357,978	86,647,964	101,897,633	102,814,848	107,190,021	64,053,276
VCSH	705.684	1,283,206	1,653,987	6,257,849	7,766,468	10,106,287	11,376,757	11,959,092	12,397,303	12,504,202	12,624.452
Sector ratio (5)/Equity	3.95	2.82	4.00	2.39	2.28	2.27	2.94	2.95	3.52	3.62	0.00

Besides, we need to consider the operating costs of the bank to better assess the profit that the bank achieves. A typical expense of the banking industry is the provision for bad debts in the period shown on the income statement. This is one of the non-cash expenses, showing the bank's subjective assessment of lending activities, directly affecting the bank's profit statement in the period. The increased recognition of provision expense for bad debts shows that the bank lent too much in the previous accounting periods, did not carefully assess the loan quality and repayment ability of the customer, increasing the possibility of loss. bank's capital and forced to increase provision for bad debt.

In the case of Vietcombank, the forecasted growth for bad debt in each reporting period (year) of the period 2008-2013 is approximately 12%, lower than the average rate of other banks like MBB. (54%), ACB (40%), STB (42%)… Banks have started to increase provision for bad debts in recent years, depending on which bank is sooner or later in recognition and regularly recorded or not during this period. However, due to the overall effect of sluggish growth in the economy, loans are more likely to be classified as bad debt, and if so, forcing banks to make more provision for bad debts. Therefore, banks that make low provision for bad debts may have to increase their provision for bad debts more and more in the coming time,and profit reporting figures may therefore be affected and not be as “pink” in the coming years as those reported in previous years. The ability to lose capital of banks is likely to have happened, not until banks make adequate provisions for bad debts, the capital will be lost.

Provisions for bad debts during the period still go into the (accumulative) provision for bad debts on the balance sheet (Loan loss reserves, also known as Allowance for bad debts).

Table 3.9: Ratio of provision for bad debts to total outstanding loans in some banks

Unit: %

Year	2010	2011	2012	two thousand and thirteen	2014
ABB	0.00%	1.60%	2.21%	2.76%	1.82%
BAOVIET	0.60%	1.18%	2.04%	1.25%	0.00%
BIDV	0.00%	1.99%	1.74%	1.57%	1.49%
CTG	0.00%	1.03%	1.10%	0.88%	0.99%
ACB	0.00%	0.96%	1.46%	1.44%	1.36%
EAST	0.00%	1.03%	1.10%	0.88%	0.99%
EIB	0.00%	0.83%	0.81%	0.85%	1.17%
HDBank	0.00%	1.02%	0.92%	1.58%	1.15%
KIENLONG	0.00%	1.13%	1.47%	1.03%	1.01%
LIENVIET	0.00%	0.92%	1.75%	2.01%	1.15%
MDB	0.00%	1.17%	1.84%	1.03%	1.54%
MBB	0.00%	1.85%	1.76%	2.02%	2.45%
MHB	0.00%	1.24%	1.80%	1.16%	0.85%
MSB	0.00%	0.97%	2.59%	2.68%	2.31%
NAMAs	0.00%	0.76%	1.02%	0.66%	0.93%
OCB	0.00%	1.26%	1.81%	1.02%	1.42%
OCEAN	0.00%	1.04%	1.21%	2.57%	2.54%
PGBANK	0.00%	1.52%	2.31%	1.35%	1.19%
PNB	0.90%	1.36%	2.08%	2.68%	0.00%
SAIGONBANK	0.00%	2.12%	1.01%	0.95%	0.83%
SCB	0.00%	2.50%	1.12%	0.73%	0.54%
SHB	0.00%	1.22%	2.20%	1.55%	1.01%
STB	0.00%	1.01%	1.50%	1.22%	1.07%
TEACHCOMBANK	0.00%	1.40%	1.65%	1.69%	1.20%
VCB	0.00%	2.54%	2.19%	2.35%	2.34%

VIETNAM	0.00%	1.64%	1.53%	1.34%	1.19%
VIETCAPITAL	0.00%	1.07%	0.94%	1.24%	1.08%
VPBank	0.00%	1.08%	1.03%	1.15%	1.43%