Non-performing loans (NPL) at foreign credit institutions had by end-October jumped 60 percent year-on-year to 2.75 trillion dong despite their prudence, according to a central bank report.
The report says foreign credit institutions, especially all-foreign-owned banks and foreign bank branches, had a cautious credit policy, so a majority of their loans went to the manufacturing and services sectors. Their real estate and securities investment loans accounted for a fraction.
The NPL ratio at local-foreign joint venture banks grew fast, at 143.9 percent in January-October, while foreign-owned banks had the best credit quality with the NPL ratio standing at a mere 0.4 percent of total outstanding loans, the State Bank of Vietnam said in the report.
Outstanding loans of foreign credit institutions in the first ten months of the year amounted to 230.12 trillion dong, picking up 26 percent from end-2009 and accounting for 10.8 percent of the banking system’s total.
Capital mobilisation by foreign financial institutions remained insignificant, at 2 percent, or 3.76 trillion dong, but they obtained the strongest growth rate, at 103 percent compared to late 2009. Of note is capital mobilisation by foreign bank branches and non-banking institutions from the inter-bank market was often higher than from the public.
The report puts gross profit of foreign credit institutions in the period at 3.48 trillion dong, equivalent to 91 percent of the figure recorded in all of 2009. The central bank said that this profit mainly came from lending operations and foreign exchange trades.
Total assets of foreign institutions by late this year are expected to reach 420.5 trillion dong, increasing 30.8 percent year-on-year and accounting for 11.3 percent of the entire banking system’s total. Foreign bank branches took the biggest share of 64 percent in terms of assets, at 273.1 trillion dong, up 31 percent from late last year.
Meanwhile, non-banking institutions with a smaller market share had total assets of 6.85 trillion dong, or 2 percent of the total, but attained the strongest growth rate, at 89 percent compared to late 2009.
Foreign bank branches had the biggest market share in terms of capital mobilisation. At the end of the third quarter this year, foreign credit institutions raised a combined 363.9 trillion dong, up 33.9 percent from late last year.
Of this figure, foreign branches accounted for 245.5 trillion dong, rising 34.8 percent from late last year and accounting for 67 percent of total mobilisation by foreign credit institutions. Foreign-owned banks mobilised 77.44 trillion dong, 21 percent of the total.
At the end of October, Vietnam had had 71 foreign credit institutions, comprising 51 foreign bank branches, five joint-stock banks, five wholly-foreign-owned banks, six finance companies, four finance leasing companies, and 48 representative offices.
Some institutions have wholly owned units and branches being co-existent, such as HSBC, ANZ, and Standard Chartered Bank.
This year has seen the networks of foreign owned banks expanding steadily. After one year of operation, five foreign owned banks have 14 branches at provinces. There are also four branches of foreign banks and two financial companies licensed to operate in Vietnam.