In the answering document to the question of delegates, the State Bank of Vietnam (SBV)’s governor cited data from the supervisory authorities under the central bank as saying that as of March 31, 2012, the assets given as payment for debts in the balance sheets of the whole credit institution system were worth nearly 1.788 trillion dong.
If basing on the total outstanding loans and bad debts announced by the central bank in previous meetings, the value of these collaterals accounted for 70 percent of the total loans of the entire banking system as of the end of March and were 17 times higher than the total bad debts.
According to the figures announced by the central bank, by the end of 2011, the total outstanding loans of the whole banking system were nearly 2,632 trillion dong, of which, bad debts accounted for 3.07%, equalling to 97.4 trillion dong.
Looking at the fiscal statements of nine listed banks on Vietnam’s stock market, the total outstanding loans of these lenders as of the end of 2011 were 882 trillion dong, equivalent to 33.5 percent of the total loans of the whole banking system.
The total bad debts of these nine credit institutions were 12.1 trillion dong, equalling to the bad debt ratio of 1.37 percent and equivalent to only 12.4 percent of the total bad debts of the whole banking system. Of which, debts in Category 5 (irrecoverable debts) were 5.44 trillion dong, or 45 percent of the total bad debts.
Thus, it is easy to see that the bad debt ratio of nine listed banks was lower than the general ratio although the total outstanding loans of these credit institutions accounted for up to one third of the total loans of the entire banking system. But, notably, irrecoverable debts of these banks were higher than the average trend of the whole banking industry (according to the central bank’s inspection and monitoring result report, as of May 31, 2012, the total irrecoverable debts accounted for 40 percent of the total bad debts).
If considering each bank, Vietcombank (VCB), VietinBank (CTG) and Eximbank (EIB) posted the highest absolute figure of bad debts, which means that banks with higher total outstanding loans will lead to higher bad debts. If considering the relative figures, the bad debt ratio of Habubank (HBB), Navibank (NVB) and SHB was highest.
More than 60 percent of collaterals were real estate
To manage credit risk (mostly bad debt risks), banks are now using two main tools namely collaterals and risk provision fund.
By the end of 2011, the total risk provision fund value of nine listed banks reached 12.94 trillion dong, 1.07 times higher than the bad debts and 2.4 times higher than the total irrecoverable debts.
Of these nine listed banks, VietinBank, Vietcombank, ACB, Eximbank, Sacombank (STB) and MB had the total risk provisions at higher than the bad debts in contrast to three remaining banks like SHB, Habubank and Navibank.
Thus, large-scaled banks often have relatively safe provisions whilst smaller lenders have potential risks. By the end of May 2012, the entire banking system earmarked about 67.3 trillion dong for risk provision fund, accounting for 57 percent of the bad debts, lower than the spending level of aforementioned banks.
Relating to asset sources being used as collaterals, the total value of collaterals for loans at nine listed banks as of December 31, 2011 was up to over 1,532 trillion dong, equalling to 173 percent of the total outstanding loans and increasing 125 times against the bad debts of these credit institutions.
The collaterals of banks were mainly financial assets, goods and raw materials, machineries, equipments and real estate, of which, collaterals by real estate accounted for up to 62 percent (945.4 trillion dong). VietinBank, Vietcombank and ACB posted the biggest collaterals by real estate, of which, collateral by real estate at ACB made up 80 percent of the total collaterals.
In addition, currently, the collateral value of these nine credit institutions accounted for up to 173 percent of the total outstanding loans, while to ensure safety, credit institutions often lend about 70-75 percent of the collateral value. Thus, maybe banks will face difficulties when selling up collaterals to deal with bad debts and the difficulty may be in collaterals that are real estate assets as real estate market is frozen and real estate prices are falling.