How much of the bank's profits are being used to handle risks?

\>> Article in the Topic "Vietnamese banking panorama: From financial statements to economic pulse"

Behind the profit numbers is a little-noticed cost

The first quarter 2026 business results announcement season continues to bring impressive profit numbers to the banking industry. A series of banks reported profits of trillions of dong, many organisations recorded double-digit growth rates, some banks even had growth equal to the same period last year.

However, for professional investors, pre-tax profit is never the final stop of the analysis process. In the banking industry, there is a special item that can determine the quality of profits: credit risk provisions.

This is the amount of money banks must deduct from current profits to reserve for loans that are likely to incur risks in the future. In other words, if net interest income reflects the ability to make money from lending activities, then provision costs are the price the bank has to pay to control the risks associated with that activity.

Therefore, a bank with high profits is not necessarily the bank with the best quality profits. The more important question is: how much profit must banks sacrifice to handle credit risks?

Top 10 banks under the greatest pressure on provisioning

Tens of trillions of dong in profits are being transferred to the provision "buffer" goods.

If just looking at pre-tax profits, many banks are showing a quite positive growth picture. But when adding in the profit that had to be reserved for provisions, it can be seen that a significant part of business results is being transferred to reserve funds instead of becoming real profits for shareholders.

This is the reason why more and more investors are interested in the ratio of provision costs to total pre-provision profit. This indicator shows how many VND of profit generated from business activities the bank must spend to handle potential credit risks.

A high ratio means that current profits are having to "bear" many past risks or loans of not really good quality. Conversely, low ratios often reflect better asset quality and a higher ability to convert profits into real value for shareholders.

There are banks that have to spend half of their profits on provisions

The picture of provisions in the first quarter of 2026 shows a very strong differentiation among banks.

In the group under the greatest pressure, provision costs "eroded" nearly half of the profits generated during the period.

NCB is an outstanding case when the ratio of provision costs to total pre-provision profit is up to nearly 58%. That means that more than half of the bank's business results in the quarter were transferred to the reserve fund instead of becoming final profits.

VietBank and BVBank are also in the group with very high reserve ratio, approximately 50%. This shows that these banks are prioritizing strengthening their balance sheets and increasing their ability to withstand risks rather than maximizing short-term profits.

It is worth noting that provisioning pressure does not only appear in small-sized banks.

VPBank, one of the most profitable banks in the system, also has to spend about 49% of total pre-provision profits on credit risk handling. Sacombank recorded similar rates.

For VPBank, the large provision level reflects the specific characteristics of the bank's operations in segments with high profit margins such as consumer credit and SME customers. These are areas with attractive profitability but also come with greater credit risk than the average.

Meanwhile, Sacombank is still continuing to handle historical backlogs from the restructuring process that has lasted for many years. Therefore, reserve pressure is still an inseparable part of this bank's business strategy.

Comparing Profit Before Tax and Provision Expenses - Top 10 banks with the greatest provision pressure

Banks that do not have to sacrifice too much profit

On the contrary, some banks are benefiting from good asset quality and effective risk control.

Vietcombank continues to be the most prominent case. The ratio of provision costs to total profit before provisions is only about 17%, significantly lower than most banks in the system.

That shows that most of the profits that Vietcombank generates can be converted into actual profits for shareholders instead of having to be used to handle problem debts.

Techcombank and ACB maintain even lower provisioning rates, below 12%. This is one of the lowest in the industry.

This difference does not come from banks being less cautious. On the contrary, it reflects the effectiveness of the risk control process right from the stage of customer selection, credit appraisal and loan portfolio management.

In other words, these banks are solving the risk problem from the beginning instead of having to deal with the consequences at the end of the cycle.

The relationship between bad debt and provision costs

Debt ratio bad banking 2026: The biggest divergence in the financial industry is emerging

When compared with the bad debt ratio, the relationship between asset quality and provision costs becomes clearer.

Banks with high bad debt ratios such as NCB, Sacombank or PGBank are also organisations that must devote greater resources to provisions. This reflects the basic rule of the banking industry: credit risk will eventually be reflected in provision costs.

On the contrary, banks that control bad debt well are often able to maintain provision costs at lower levels.

In particular, Vietcombank continues to show its outstanding advantage by both possessing the lowest bad debt ratio in the system and maintaining a very large reserve buffer. This is the reason banks can maintain high profitability without having to trade off with increased credit risk.

What story are provision costs telling about the banking industry?

From the outside, provision costs may be just an accounting item appearing on financial statements. But in fact, this is one of the most important indicators of a bank's health.

A bank having to make large provisions is not necessarily a negative signal. In many cases, it is a sign of being proactive and cautious in risk management. Accepting to sacrifice a portion of current profits can help banks create a healthier balance sheet in the future.

On the contrary, high profits accompanied by unusually low provision costs are not always good news. If asset quality declines but provisions are not increased correspondingly, current profits may simply be a trade-off for future years' risk.

The picture of the first quarter of 2026 shows that the banking industry is entering a period of clearer differentiation than ever. Some banks are taking advantage of their quality asset base to convert most of their profits into real value for shareholders. Others choose to increase backup buffers to prepare for future fluctuations.

So, when evaluating a bank's business results, the question is no longer simply how much money they make. What's more important is how much of it they have to devote to handling risk. And that is the measure that most fully reflects the profit quality of the banking industry today.

\>> Article in the Topic "Vietnam Bank Panorama: From financial statements to economic pulse"

---

Source: TheLeader — theleader.vn. The article is reposted for the purpose of sharing knowledge for the founder and investor community in the ecosystem HCM VIF.