Fitch Ratings has just published a special report titled “Vietnamese Banks-Focus on Asset Quality: Three Stress Scenarios and warned that 2009 and next is likely to be very challenging for Vietnam’s banks.
Quality of loans by local banks is bound to deteriorate, especially loans for broad property developments sector and dollar-denominated loans for borrowers in general, Fitch Ratings said.
In the financial year of 2008, loans quality slightly deteriorated, non-performing loans ratio was 3.5 per cent of the system loans according to Vietnam’s accounting standards, however, impaired loans under International Financial Reporting Standards are no doubt considerably higher than this, Sabine Bauer, director in the agency's Financial Institutions team said.
Last year, Vietnam’s high inflation peaked at 28 per cent in August by very strong loans growth with buoyant domestic and external demand, and its central bank dramatically raised commodity prices with other measures to address the issue.
Given these factors, loans came to a halt in second half and early this year, the central bank reversed tact and lowered rates, and inflation appears to be abating in any case.
Vietnam’s exporters are likely to face difficulties due to slowing global demand and Vietnamese dong is about to depreciate 9 per cent since end-2007, Fitch said.
While smaller private banks tend to focus on SMEs state-owned commercial banks with assets accounting for 52 per cent at end-2008 prefer to lend larger and state-owned corporations which generally lend to property sector.
Fitch forecasts levels of non-performing loans at 10 per cent, 15 per cent and 20 per cent.
Fitch also rates ACB and Sacombank, and Vietcombank “D,” Vietinbank, BIDV and Agribank “D/E”. (Fitch rates)
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