Zero-dong banks struggle for restructuring

22-Jan-2020 Intellasia | Dien dan Doanh nghiep | 6:02 AM Print This Post

Entering 2020, banks are racing to announce Tet bonuses, but zero-dong banks are still silent. So how are these banks doing business?

For five years, officials and employees of zero dong banks have just taken Tet holidays quietly and felt very pity to see many other banks racing to announce the Tet bonus for their officials and employees. They neither receive Tet bonuses nor 13th month salary.

“These banks are in the process of restructuring and recovering bad debts to reduce accumulated losses, so staff salaries are the lowest in the industry. We don’t have bonuses, because there is no welfare fund. We just expect the banks to carry out successful restructuring soon so that the life of their staff and employees will be improved ” a Global Petroleum Bank official shared.

It is known that, since March 2015, the State Bank of Vietnam (SBV) issued compulsory buying decisions at a price of zero dong for banks including Construction Bank (VNCB, now known as CBBank), Global Petroleum Bank (GPBank) and Ocean Bank (OceanBank).

According to SBV, up to now, the general activities of the three banks have been stable. Bad debts, unprofitable assets of these banks were initially handled and recovered, newly increased deposits, the situation of mass withdrawal of customers stopped, and the administration and management were strengthened.

Despite the easing, these banks still have direct involvement in administration, management, as well as sharing and supporting the business of Vietcombank, VietinBank and the strict supervision of SBV as the owner.

In fact, so far the business situation of these banks is still in a secret, financial indicators have not been transparent and are still a question mark after five years of restructuring.

For the past five years, CBBank has been fully operational and focused on recovering large debts and reaping positive results. It is estimated that by the end of 2019, CBBank will have total assets of over 20 trillion dong; capital mobilisation increases by nearly 4 trillion dong, up 14 percent compared to 2018. Credit sales increases by over 1 trillion dong, up 10 percent compared to 2018. In particular, the handling and recovery of bad debts are considered the core of CBBank’s restructuring process, accumulated figures up to November 30, 2019 reached over 5.5 trillion dong for the debt collection group under the judgment and over 800 billion dong to recover the small debt group.

Meanwhile, GPBank’s activities are still unknown. According to Pham Huy ThongMember of the Board of directors cum general director of GPBank, as of June 30, 2019, the balance of capital mobilisation of GPBank in the market I has increased significantly compared to the beginning of 2019, with abundant liquidity. In parallel with capital mobilisation activities, the indicators including outstanding loans and new customer development were stable over each month. International payment activities, foreign currency trading, and cards also saw a significant growth in sales.

Out of three zero dong banks, OceanBank seems to be most appreciated. Ngo Anh Tuan, general director of OceanBank, said that in 2019, bad debt collection activities exceeded 47 percent of the plan submitted to SBV for approval; total deposits increased as compared to May 6, 2015, of which retail customer deposits increased by 52%; Loans to retail customers increased to 247%. In which, nearly 90 percent was lent to production and business sectors. In 2020, OceanBank continues to build a customer-centric business model that strictly complies with credit safety criteria.

However, these are just one-way information. Therefore, it is expected to see the results of audits of these banks as the State general Auditor has a plan for implementation in 2020.

Many experts believe that, in order to revive the zero dong banks soon, it is necessary to accelerate the restructuring process of these banks. However, the budget should not be used to restructure these banks, but should call for strategic investors, especially foreign investors to participate in restructuring these banks.

It is known that in the previous meeting with deputy prime minister Vuong Dinh Hue, Nobiru Adachi, Chief Executive Officer of J Trust Group, said that the group wanted to participate in restructuring CB Bank. Accordingly, the J Trust Group would not only contribute capital, but support the CB in terms of technology and financial operations. However, so far there is no information about this deal.

In late 2019, GPBank announced the search for strategic investors to restructure under the direction of SBV. However, due to the lack of transparency in GPBank’s operation, there was no information showing that this bank had called for strategic investors.

In fact, the restructuring of zero dong banks is facing many difficulties, even when these banks find a strategic partner.

According to current regulations, the plans to restructure weak banks must consult with many ministries and branches. However, consulting with relevant ministries and agencies takes a lot of time, so opportunities for cooperation with strategic investors, especially foreign investors, will be missed. That is also one of the reasons that no zero dong bank can sign an agreement with foreign investors.

With the above difficulties, a financial and banking expert said that, in order to speed up the process of restructuring zero dong banks, not only SBV could do it but the involvement of many related ministries and branches was required. Especially for the process of handling collaterals to recover debts related to economic cases, it was necessary to coordinate with many functional agencies.

“It is necessary to increase the right for SBV to approve the restructuring project of zero dong banks to reduce administrative procedures, accelerate the approval of the plan to help foreign investors find opportunities and cooperate more quickly. It is important that SBV needs to be more active in promoting the handling of weak banks,” said the expert.

 


Category: Finance, Vietnam

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