Debt settling firm in place, but questions remain

Monday, Jul 29, 2013 17:22

Bad debt ratios would continue to lure significant interest in the market with the approach of the six-month business results announcements. — Photo

HA NOI (Biz Hub) ― Since the VND500-billion (US$23.8-million) Viet Nam Asset Management Company (VAMC) began operations last Friday, the question in the market place is which banks will have to sell bad debts.

State Bank of Viet Nam Governor Nguyen Van Binh said the VAMC would help banks clear bad debts, stimulate credit growth and support economic development, though it wouldn't show immediate effects.

VAMC general director Nguyen Huu Thuy said the company targeted a bad debt value of about VND40-70 trillion ($1.9-3.3 billion) this year. It would buy bad debts at market prices, where practical conditions permitted, after issuing special bonds in the short term.

The Government required credit institutions with bad debt ratios of 3 per cent or more to sell their bad debts to the VAMC. State Bank chief inspector Nguyen Huu Nghia said about 30 institutions would be affected.

But no names have been announced so far. In fact, several major commercial banks have posted positive debt figures, according to financial website

Military Bank announced late last week that in the first half of the year its bad debt ratio stayed secure at below 2.5 per cent, with profit reaching VND1.75 trillion ($83.3 million) and total asset value increasing 15 per cent. It also reported a deposit increase of 18 per cent and a lending rise of 20 per cent in the period.

Sacombank said its bad debts accounted for 2.46 per cent of the total outstanding loans, with deposits in dong up 17 per cent and lending up nearly 13 per cent in the first half. Its pre-tax profits reached VND1.45 trillion ($69 million) and total assets grew 5.5 per cent in six months.

As reported by Vietcombank Securities Co, Vietcombank's bad debt ratio for the first half declined sharply to 2.7 per cent from the 3.22 per cent level recorded in the first quarter. Although lending declined 1.1 per cent in six months, the bank earned VND2.6 trillion ($123.8 million) in pre-tax profits, with deposits growing 3.4 per cent.

Industry insiders said bad debt ratios would continue to lure significant interest in the market with the approach of the six-month business results announcements.

Independent financial expert Nguyen Tri Hieu told VnEconomy that it would be hard for VAMC to buy bad debts this year since the State Bank in May postponed by one year of the application of Circular 02, which would regulate debt classification. The delay would set back transparency as banks would seek to hide bad debts, he said.

A charter capital of VND500 billion would also be an obstacle for a company targeting to solve VND40-70 trillion, and even VND100 trillion ($4.76 billion), worth of bad debts, he said. ― VNS

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