VINACHEM

Non-performing loans (NPLs) as of the end of May accounted for 2.78 per cent of the entire banking system’s total outstanding loans.

This was still under the 3 per cent threshold targeted by the Government, deputy governor of the State Bank of Việt Nam Nguyễn Thị Hồng said during a government press conference yesterday.

The move was made after concern was expressed about an upward trend in NPLs, as reported recently in H1 financial reports of several commercial banks.

Hồng said the central bank would still consider the handling of bad debts a top priority during the last few months of the year.

She said the central bank had instructed commercial banks, whose NPLs were more than three per cent, to report measures to resolve the bad debts issue to the central bank.

“Besides a strict control on credit growth to ensure credit quality and to avoid raising new bad debts, the governor has also asked credit institutions to make provisions for their risky loans,” Hồng said.

She said the governor had also asked the Việt Nam Asset Management Company (VAMC) to deal with bad debts in a move to control the total bad debts under three per cent.

In July, financial statements released by some large commercial banks showed that bad debts increased in the first half of the year.
Notably, bad debts skyrocketed at Eximbank, surging sharply from 1.86 per cent at the end of last year to 5.3 per cent by the end of June.

Of Eximbank’s total bad debts worth VNĐ4.285 trillion (US$191.29 million), subprime debt surged 13 times to reach VNĐ2.415 trillion, while the increasing rate of doubtful debt and potentially irrecoverable debt was 34.8 per cent each to touch VNĐ797 billion and VNĐ1.073 trillion, respectively.

Due to the high NPL rate, Eximbank had to double its provisions to touch VNĐ324 billion in H1, causing pre-tax profits to fall sharply to end at VNĐ79 billion, down 88 per cent year-on-year.

The Bank for Investment and Development of Việt Nam (BIDV) -- the country’s largest commercial bank in terms of assets -- also reported that its bad debts increased from roughly 1.6 per cent at the end of last year to two per cent by the end of June. The increasing bad debts in H1 were worth more than VNĐ3 trillion, bringing the bank’s total bad debts to reach VNĐ13.183 trillion. Of these debts, potentially irrecoverable debts and doubtful debts rose from VNĐ5.190 trillion and VNĐ887.76 billion to touch VNĐ6.343 trillion and VNĐ2.326 trillion, respectively.

Sacombank’s bad debts, as of the end of June, also increased to 2.83 per cent from 1.85 per cent at the end of last year.

Due to the large number of bad debts, Sacombank’s provisions surged 86 per cent in H1, causing the bank’s pre-tax profit to drop 76 per cent year-on-year to touch VNĐ363 billion.

Experts attributed the increase in bad debts in banks in H1 to the fact that the VAMC bought only a small amount of bad debts in the first half of this year, after meeting the target for controlling bad debts of the entire banking system under three per cent at the end of September last year.

According to a government report on the country’s socio-economic results in H1 2016, VAMC has so far bought VNĐ241 trillion of bad debts. The number of bad debts was nearly the same as compared with those released late last year. It meant that the new bad debts that arose in commercial banks in H1 remained with the banks, instead of being transferred to the VAMC, as was done in previous years.
The central bank reported in April that the bad debt ratio of the entire banking system as of the end of March was 2.62 per cent.