Vietnam's SCB Restructuring: Navigating Debt and Digital Growth Amid Regulatory Hurdles

Vietnam’s banking sector faces a pivotal moment as the State Bank of Vietnam (SBV) prepares to finalize its restructuring plan for Sacombank (SCB), one of the country’s oldest and most troubled lenders. Once on the brink of collapse due to a $44 billion fraud scandal involving its former owner, SCB has made strides toward recovery. Yet lingering debt issues, regulatory delays, and unresolved legacy assets cloud its path to full revival. This article dissects SCB’s progress, challenges, and implications for investors.

Progress Amid Persistent Debt Challenges

SCB’s restructuring journey, launched in 2016, has seen measurable improvements. By late 2023, its bad debt ratio plummeted from a staggering 28.1% in 2016 to 2.1%, driven by aggressive bad debt sales and full provisioning for unrecovered loans. The bank’s profitability surged in 2023, with pre-tax profits hitting VND 9,595 billion (≈$3.8 billion)—a 51.4% year-on-year increase—and ROA and ROE climbing to 1.22% and 18.3%, respectively.

However, progress has been uneven. By early 2025, unresolved legacy assets from the 2015 merger with SouthernBank, totaling VND 18,000 billion (≈$716 million), remain a critical obstacle. These include real estate collateral tied to the fraud scandal and shares of the former shareholder group of Mr. Tram Be, awaiting regulatory approval for disposal. Until resolved, SCB cannot declare restructuring completion or distribute dividends to shareholders—a drought that has lasted nine years.

The Sun Group Rescue Plan: A 15-Year Gamble

In late 2023, Sun Group proposed a 15-year repayment framework to address SCB’s $25.8 billion bailout from the SBV. Under this plan, repayments would begin in the 14th year, with full settlement by year 15—a timeline critics argue delays accountability. As of early 2025, the plan’s approval status remains uncertain. The SBV’s continued provision of “special loans” to SCB highlights its fragility: SCB remains entirely dependent on central bank liquidity to cover deposit withdrawals, with its capital adequacy ratio (CAR) dipping to -176% by late 2024.

The stock, trading at VND 35,000–40,000 in early 2025, reflects investor skepticism. Despite record profits, low P/E ratios (6.9x) and concerns over unresolved assets have kept valuations muted.

Digital Transformation as a Silver Lining

Amid the debt struggles, SCB’s digital push offers a glimmer of hope. By 2024, 70% of its 20 million customers used digital platforms, with transactions surging 34.8% year-on-year. Innovations like AI-powered voice hotlines and partnerships with Apple Pay expanded its reach. Digital deposits grew to VND 578 trillion (≈$23 billion), easing reliance on traditional branches.

The bank’s adoption of Basel III standards and IFRS 9 accounting further bolstered transparency, with provisions for bad debts rising to VND 25,099 billion. These measures position SCB as a pioneer in Vietnam’s push for banking modernization.

Risks and Regulatory Uncertainties

Despite progress, SCB faces formidable headwinds:
1. Bad Debt Resurgence: The bad debt ratio rose to 2.4% by early 2024, with high-risk Group 5 debts (likely unrecoverable) increasing 81%. A court case involving a lost deposit at its Cam Ranh branch underscores lingering operational risks.
2. Regulatory Delays: The SBV’s silence on asset resolution plans has stalled restructuring completion. Shareholders await clarity on dividend distribution, with retained profits nearing VND 28,400 billion (≈$1.1 billion).
3. Global Economic Pressures: Trade wars and U.S. tariffs threaten Vietnam’s export-driven economy, complicating SCB’s path to recovery.

Investment Implications: Proceed with Caution

SCB presents a high-risk, high-reward proposition. On one hand, its digital growth, improved profitability, and Moody’s upgraded credit rating to B2 signal underlying strength. On the other, unresolved assets and regulatory limbo create uncertainty.

Investors should monitor two key catalysts:
1. Legacy Asset Resolution: If the SBV approves SCB’s asset disposal plan in 2025, dividends could resume, potentially lifting the stock.
2. Bad Debt Trends: A reversal in the rising bad debt ratio (now at 2.4%) would signal stabilization.

Conclusion

Sacombank’s journey epitomizes Vietnam’s broader banking sector challenges: balancing rapid digitization with legacy debt. While its 2023–2024 profits and digital transformation validate its revival potential, unresolved assets and regulatory delays cast a shadow. Investors should prioritize caution, focusing on signs of progress in asset resolution and bad debt management. If SCB navigates these hurdles, it could emerge as a leader in Vietnam’s financial sector—a comeback story worth watching.

Final Data Points:
- 2024 Pre-tax profit: VND 12,720 billion (+32.5% YoY)
- Bad debt ratio: 2.4% (vs. 2.1% in 2023)
- Digital customer base: 20 million (+34.8% YoY)
- Unresolved legacy assets: VND 18,000 billion pending SBV approval

The path forward hinges on the SBV’s decisiveness—a reminder that in banking, as in life, recovery is often slower than the fall.