Bad debts totaled $2.86 billion in HCM City in the first eight months of 2014. -- Photo vietstock.vn

HCM CITY (Biz Hub) ─ The total amount of bad debts of credit institutions here reached VND60 trillion (US$2.86 billion) at the end of August, representing an increase of about VND16 trillion ($761.90 million) over the end of last year.

Figures from the State Bank of Viet Nam's (SBV) HCM City branch also revealed that the latest level of bad debt represented 6.1 per cent of all outstanding loans in the city.

The SBV attributed the increase to continuing economic challenges and the implementation of SBV Circular No. 02/20-TT-NHNN, which required banks since June 1 to classify debts and establish provisional funds.

Bad debt ratios were highest among financial and financial leasing companies, ranging from 21 to 37 per cent. The ratios were mostly lower than the legally-secure level of three per cent at banks, except for several lenders such as DongABank with 6.8 per cent and Viet Capital Bank with 3.61 per cent.

More than 74 per cent of total non-performing loans were in the production and business areas, while more than 25 per cent were in non-production sectors.

In eight months, banks here resolved about VND15.58 trillion ($741.90 million) in bad loans, bringing the total amount of resolved bad debts here since 2013 to roughly VND49.46 trillion ($2.36 billion).

The SBV branch here said bad debt resolution was expected to improve in the coming months as the operations of the Viet Nam Asset Management Company would be improved.

Meanwhile, the Ministries of Justice and Natural Resources and Environment have enforced a joint circular facilitating asset settlement and debt recovery processes.

According to the SBV, the business results of banks here have also improved this year, achieving a combined profit of more than VND12 trillion ($571.43 million) in the first eight months or double that of the same period last year. ─ VNS