Positive signals from bad debt treatment

07-Oct-2017 Intellasia | Nguoi Lao Dong | 6:00 AM Print This Post

Vietnam Asset Management Co (VAMC)’s recent strong acquisition of tens of trillion dong worth of bad debts has created optimism in dealing with long-term bad debt.

When bad debts are sold, banks will recover capital and reduce operating costs, contributing to stabilising the interest rates.

Most recently, Sacombank has signed contracts to sell 2.85 trillion dong worth of bad debts from three debts of three businesses for VAMC. All of these debts are mortaged by real estate, machinery and equipments in Da Nang and HCM City. Accordingly, two debts of Hoan Cau Group (including Hoan Cau Khanh Hoa Joint Stock Co and Hoan Cau Nha Trang Co., Ltd) are valued at more than 2.577 trillion dong, of which 2.4 trillion is principal debt and interest and costs are more than 177 billion dong.

Duong Cong Minh, Chair of Sacombank, said the difference of selling debt to VAMC is the banks quickly recover capital and increase the financial capacity. Meanhile, VAMC decided to acquire debts because it earns profit. “VAMC’s acquisition of debt at market prices will help banks meet their target of reducing non-performing loans.” Sacombank is striving to reduce its bad debts by 15-20 trillion dong, review the debt to continue selling to VAMC with an amount of one trillion dong. Perhaps, 2017 is considered as the hinge of dealing with bad debt, creating a premise for Sacombank and other banks to reduce the bad debt ratio” Minh said.

Meanwhile, Vo Van Chau, general director of Kien Long Commercial Joint Stock Bank (KCB), said that the bank is reviewing the classification of many bad debts to sell to VAMC.

A month ago, VAMC also signed a debt purchase agreement with two banks for debts of Sai Gon One Tower Co, Lien Phat Co, Minh Quan Co, Superdeck M & C Co with total outstanding debt (principal and interest) of over seven trillion dong. At the same time, VAMC said it is setting up a price appraisal council, setting the starting price for conducting public auctions in the near future.

Nguyen Tien Dong, Chair of VAMC, said that the prime minister, the State Bank of Vietnam has instructed VAMC to assign specific tasks to deal with bad debts. Therefore, in the immediate period, VAMC will cooperate with six banks (ACB, Sacombank, BIDV, Vietcombank, VietinBank and Agribank) being selected by the central bank to quickly deal with the bad debts of the banking system.

“In 2018, VAMC will increase chartered capital from two trillion dong to five trillion and increase to 10 trillion dong by 2010. Although this amount is not large compared to $10 billion of bad debts being managed by VAMC, with this capital source together with assigned task and the support from authorities, the bad debt settlement is expected to see positive moves”, Dong said.

 


Category: Finance, Vietnam

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