Deputy Governor m w88 the State Bank m w88 Vietnam Nguyen Thi Hong said that this figure was still under the 3 percent threshold targeted by the Government. She noted that the central bank would still consider the handling m w88 bad debts a top priority during the last few months m w88 the year. According to a report m w88 SBV released in April, 2016, the bad debt ratio m w88 the entire banking system as m w88 the end m w88 March was 2.62 percent.
Ms. Nguyen Thi Hong added that the SBV had instructed commercial banks, whose NPLs were more than 3 percent, to report measures to resolve the bad debts issue to the central bank. The SBV is controlling strictly the growth m w88 credit to ensure credit quality and to avoid raising new bad debts. Besides that, the SBV asked credit institutions to make provisions for their risky loans.
The SBV’s governor asked the Vietnam Asset Management Company (VAMC) to deal with bad debts in a move to control the total bad debts under 3 percent, Ms. Nguyen Thi Hong said. The government established the Vietnam Asset Management Company in 2012 to help banks offload non-performing loans or toxic debts from their books.
The move was made after concern was expressed about an upward trend in NPLs, as reported recently in H1 financial reports m w88 several commercial banks. Notably, bad debts skyrocketed at Eximbank, surging sharply from 1.86 percent at the end m w88 last year to 5.3 percent by the end m w88 June.
m w88 Eximbank’s total bad debts worth 4.285 trillion VND (191.29 million USD), subprime debt surged 13 times to reach 2.415 trillion VND, while the increasing rate m w88 doubtful debt and potentially irrecoverable debt was 34.8 percent each to touch 797 billion VND and 1.073 trillion VND, respectively.
Due to the high NPL rate, Eximbank had to double its provisions to touch 324 billion VND in H1, causing pre-tax profits to fall sharply to end at 79 billion VND, down 88 percent year-on-year.
The Bank for Investment and Development m w88 Vietnam (BIDV) also reported that its bad debts increased from roughly 1.6 percent at the end m w88 last year to two percent by the end m w88 June. The increasing bad debts in H1 were worth more than 3 trillion VND, bringing the bank’s total bad debts to reach 13.183 trillion VND. m w88 these debts, potentially irrecoverable debts and doubtful debts rose from 5.190 trillion VND and 887.76 billion VND to touch 6.343 trillion VND and 2.326 trillion VND, respectively. BIDV is largest commercial bank in terms m w88 assets in Vietnam.
As m w88 the end m w88 June, Sacombank’s bad debts also increased to 2.83 percent from 1.85 percent at the end m w88 last year. Due to the large number m w88 bad debts, Sacombank’s provisions surged 86 percent in H1, causing its pre-tax profit to drop 76 percent year-on-year to touch 363 billion VND.
Experts attributed the increase in bad debts in banks in H1 to the fact that the VAMC bought only a small amount m w88 bad debts in the first half m w88 this year, after meeting the target for controlling bad debts m w88 the entire banking system under three percent at the end m w88 September last year.
According to a government report on the country’s socio-economic results in H1 2016, VAMC has so far bought 241 trillion VND m w88 bad debts. The number m w88 bad debts was nearly the same as compared with those released late last year. It meant that the new bad debts that arose in commercial banks in H1 remained with the banks, instead m w88 being transferred to the VAMC, as was done in previous years.
Vietnamese commercial banks have started the second phase (2016 - 2020) m w88 restructuring which sets higher requirements in settling existing problems and improving competitiveness. While the most important goal m w88 the first phase was debt settlement to improve the quality and M&A to reduce weak credit institutions, the second phase will focus on the improvement m w88 the banks’ governance in accordance with international standards.
Analysts have warned that big difficulties are still ahead. For example, the problems the Construction Bank are facing when trying to collect debts from Phuong Trang, a big client, showed that the bank still has to struggle to clear up the bad debts. Besides that, the Eximbank still cannot organize the shareholders’ meeting because m w88 problems arising from ownership transfer, and bad business performance which has sown division among shareholders. It means that the bank cannot restructure its operation soon.
The SBV has reaffirmed its commitment to keep the bad debt ratio at less than 3 percent m w88 outstanding loans in 2016. Bad debt in the Vietnamese banking system stood at 2.9 percent in 2015, significantly down from 3.7 percent the year before, according to an annual financial report published by the National Financial Supervisory Commission.
