VietABank Profit Rises as Bad Loans Increase

The real pressure point is asset quality. Total bad debt in the group 3 to 5 bucket rose 14.6% from the start of the year to nearly 1.334 trillion dong, pushing the non-performing loan ratio to 1.38% from 1.31%. More tellingly, group 3 loans, or substandard debt, surged 2.6 times to about 1.302 trillion dong, making up the bulk of the bank’s troubled book.

At the same time, the bank’s group 5 loans, the worst category, fell 96.3% to just 24 billion dong. That looks better on the surface, but it does not erase the fact that a large amount of stress has moved one notch up the ladder rather than disappearing. For long-term shareholders, that often means risk has been deferred, not eliminated.

The shrinking buffer is what should concern investors most. VietABank’s loan-loss reserve balance fell 31.1% from the beginning of the year to about 732 billion dong, while it used roughly 496.6 billion dong of provisions to write off bad loans in the period. As a result, its bad-debt coverage ratio dropped to 54.8% from 91.2% at the start of the year. In plain English, the bank now has much less cushion to absorb further deterioration if borrowers keep slipping.

That makes the earnings picture more fragile than the headline profit growth suggests. In the third quarter alone, net interest income fell 16.3% as funding costs rose faster than loan yields, and operating profit before provisions dropped nearly 30%. Pre-tax profit still rose 9.1% in the quarter to 366.3 billion dong only because VietABank booked a 16.8 billion dong provision reversal, compared with heavy provisioning a year earlier.

For investors, the takeaway is not to dismiss VietABank’s profit growth, but to ask how much of it is repeatable. The bank has made progress expanding fee income and has completed a capital increase that lifted charter capital to more than 9.021 trillion dong, with more room to raise it further. That supports growth and regulatory flexibility. But a bank can only compound sustainably if asset quality improves as quickly as lending volumes and income.

VietABank is still on track to meet a large part of its full-year profit target, and it has the capital base to keep expanding. Even so, the surge in group 3 debt suggests the credit cycle is not yet fully under control. For patient investors, that makes the stock worth watching rather than rushing into — especially until the bank proves that bad loans are truly stabilizing, not just shifting categories.