Removing the NPLs has shown good signs, based on the figures released by the State Bank of Vietnam (SBV) and commercial banks. However, the bad debt is still a challenging job for 2015.
Bad debts fall sharply
Vietcombank has announced key business data base, of which the most prominent achievement of the bank in the past year is resulted from the bad debt recovery. While at the end of quarter of 2014, the NPL ratio of the Vietcombank accounted for 3.09 percent of total loans, at the end of 2014, the bank's NPL ratio has plummeted to less than 2.3 percent. In particular, the balance of the risk management fund was nearly equivalent to the total bad debts.
The bank's bad debt recovery is very impressive; total debts of Vietcombank recovered in 2014 were over VND1,800 billion, more than double in 2013. This is considered a recorded outcome.
Sharing about this success, Vietcombank's leaders said that the economy is showing signs of recovery while the business activities of Vietnamese enterprises are better and at the same time, the SBV is implementing financial supporting policies for enterprises. That is the fundamental factor helping Vietcombank handle the debts better.
The results of the NPLs are very impressive; Vietcombank's risk management fund has increased by 29.2 percent (VND4,535 billion) and the bank's safety index is significantly improved. In addition to the recorded bad debt recovery, in 2014 the credit growth rate of Vietcombank has reached 18 percent, higher than the target of 15 percent given at the beginning of the year.
Saigon Hanoi Bank (SHB) has also reported the positive recovery of bad debts. According to the quarterly financial reports by September 30, 2014, the total outstanding loans of SHB were VND96,099.75 billion, up VND19,590.1 billion, or 25.6 percent, compared to the end of 2013.
Despite the NPL ratio of 2.4 percent, the ratio decreased sharply from 4.08 percent to 2.4 percent or VND794.93 billion, compared to 2013. In late 2012, after the merging of Habubank and SHB, the bad debts had amounted to 8.8 percent.
Under the leadership of SHB, the bank has firmly focused on collecting the overdue debt and bad debt, and reselling to property management companies under Vietnam Asset Management Company (VAMC); the bank also implemented restructuring measures to restore and improve production and business activities, handling collateral and adopting interest exemptions, and restructuring the repayment period in accordance with the cash flow that come from customers. In the third quarter of 2014, the SHB's profit before tax reached VND235.5 billion and the profit accumulated within 9 months has reached VND740.95 billion.
As reported by the SBV, in October, 2014, the banks have handled 54.3 percent of total bad loans (equivalent to VND465 trillion). Particularly, the VAMC bought nearly VND95 trillion of bad debts and gradually removed all the loans as regulated; besides, nearly VND4 trillion of bad debts and interest are withdrawn. The SBV said that the NPL ratio fell to 5.43 percent compared with 17 percent in 2012. As reported by the credit institutions, this figure is about 3.8 percent and it is decreasing; the ratio of bad loans was 4.17 percent in June, 4.11 percent in July and 3.9 percent in August.
Bad debts for 2015
At the Government's regular meeting, in last October, the Prime Minister Nguyen Tan Dung has asked to continue to implement measures to put the bad debt of 3 percent (the rate of the State Bank) in late 2015. This is required by the National Assembly after adopting a resolution on the socio-economic development plan in 2015.
According to Nguyen Thi Hong, Deputy Governor of the SBV, to achieve the projected NPL ratio at the end of 2015 of about 3 percent, the SBV continues to accelerate the removal of the NPLs, along with the restructuring of the banking system and improvement of legal framework to facilitate the handling of bad debts, especially the provisions of purchasing, selling and handling the debts to guarantee the collateral responsibility of the borrower and the creditor's rights. Besides, the SBV continues to promote the financial strength, capacity, and role of the VAMC in trading debts based on the market mechanism, the thriving debt trading market, and encouraging domestic and foreign investment to buy and sell bad debts, as well as requiring financial institutions to publish the public credit, bad debt and transparency of the processing results, to perform quality control measures credit, bad debt limit increase, and to strengthen inspection and monitoring of the bad debts, credit quality and implementation of laws and regulations on loan classification and risk management.
According to Hong, it is necessary to strengthen economic restructuring and SOE restructuring, to remove difficulties for enterprises and to promote business operation as well as support market conditions for the purposes of decreasing the NPL ratio to about 3 percent by the end of 2015.
The economy has entered a phase of recovery, but there are still many difficulties and prospects that are challenging businesses; therefore, resolving the NPLs to below 3 percent puts a heavy pressure on the SBV. The massive growth of the credit in the last months of 2014 to reach the growth targets also raises new fears of bad debts that may arise. This may put heavier burdens on the functional agencies to solve this difficulty.
Le Minh
Vietnamese
