Vietnamese banks’ bad debt ratio remains an unknown

30-May-2012 Intellasia | Vietnamnet | 7:01 AM Print This Post

Governor of the State Bank of Vietnam Nguyen Van Binh said the bad debt ratio has increased from 3.2 percent earlier this year to 3.6 percent by mid April. However, other calculations show that the bad debt ratio is 3-4 times higher than the released figure.

The 2012 annual report about Vietnam’s economy conducted by the Vietnam centre for Economics and Policy Research VEPR under the Economics University, an arm of the Hanoi National University, shows that the bad debt ratio of the Vietnamese banking system is estimated at between 8.25 and 14.01 percent.

The report has also shown the forests by other institutions about the unknown.

According to StoxPlus, the average bad debt ratio of the analysed banks is 2.3 percent. Meanwhile, Fitch Ratings believes that the Vietnamese banks’ debt ratio is at 13 percent.

Quoting Ho Ba Tinh, an analysis, the research team said the bad debt ratio of banks may reach 7-8 percent, or even over 10 percent, or about 300 trillion dong.

Vietnamese banks now do not follow the international practice when calculating the bad debts, while the bad debts incurred state owned enterprises amount to 70 percent of banks’ bad debts

The bad debt ratio increase has been anticipated. In the whole year 2011 and the first quarter of 2012, the production fell into stagnation, thousands of businesses got dissolved, while the real estate market got frozen, thus making real estate products unsold and real estate developers unable to pay bank debts.

Dr Quach Manh Hao said the figure about the bad debt ratio released by the research team was calculated based on the lending to the real estate and securities sectors, which account for 10-12 percent of the total banks’ outstanding loans.

If the figures released by the State Bank of Vietnam are accurate, which means that the bad debt ratio of the whole banking system has risen from 3.2 percent to 3.6 percent, the real estate and securities loans in 2011 would be listed as bad debts.

The research team has estimated the bad debts after considering the bad debts of 41 Vietnamese banks. The calculations did not include Vinashin’s debts, because it is impossible to calculate the sum.

The banks’ outstanding loans to state owned enterprises account for 16.9 percent of total outstanding loans, of which the outstanding loans provided to 12 state owned economic groups amounts to 53 percent of the total outstanding loans of state owned enterprises.

It’s not important to count, it’s more important to deal with problems

Though it’s still unclear about the accuracy of the figures, all of them show that the bad debts have been increasing significantly.

Vietcombank, one of the biggest Vietnamese banks, has reported the bad debt ratio increasing from 2.03 percent earlier this year to 2.87 percent by late March 2012. Of this amount, irrecoverable debts have risen by 32 percent to 3100 billion dong.

Vietinbank’s bad debt has also risen from 0.75 percent to 1.85 percent. The figures of Eximbank are 1.6 and 2 percent, while ACB’s bad debts rose from 0.85 percent in late 2011 to 1 percent.

The public has been stirred up recently when Habubank, during the merger process into SHB, unexpectedly announced the bad debt ratio of 16.06 percent in accordance with Vietnam’s accountancy standards.

Realising that settling bad debts is an urgent task for now, the government has released a decision on restructuring the banking system in 2011-2015. The noteworthy thing of the decision is that the State Bank is allowed to directly buy stakes of weak banks; expand the foreign ownership limits at domestic banks; encourage big banks to buy the debts from weak banks; and allow banks to sell bad debts to the Debt and Asset Trading Corporation.


Category: Finance

Print This Post

Comments are closed.