It is hard to weigh the realistic status of bad loans among Vietnamese commercial banks with different figures circulating just 20 days before the State Bank of Vietnam has been required to report its scheme to settle the bad debts of commercial banks.
According to Vu Viet Ngoan, general director of Bank for Foreign Trade of Vietnam (Vietcombank), by December 31, 2005 this state-run bank posted total non-performing loans of up to VND5.6 trillion (US$354 million) of which VND4.56 trillion was reported in the bank’s equitisation project.
By the end of last year, Vietcombank settled VND4.406 trillion or 97 per cent of the bank’s total NPLs under its equitisation project. Additionally, the bank settled VND700 billion out of its total bad debts of VND1 trillion which did not come under the bank’s equitation project. “Basically, all old bad debts will be settled thoroughly,” Ngoan added.
Similarly, the Bank for Agriculture and Rural Development (Agribank) by December 31, 2005 reported total NPLs of VND3.672 trillion, accounting for two thirds of its total lending balance.
Le Van So, Agribank’s general director said the bank thoroughly settled total bad loans of more than VND8 trillion before 2000, of which up to VND3.1 trillion was funded to sugar lending programs.
It can be seen that banks have struggled to clean up their financial status, especially by their attempts to spruce their financial statements. On paper, the banks debt situations have been significantly improved.
However based on the debt payment situation, recoverable debts are very low, for example, Agribank was able to collect VND164 billion out of a total of VND8 trillion worth of debts. Bad loans were posted on its off-balance sheets.
In fact, there are many different opinions on the bad loans of commercial banks. Namely, Vietcombank said that its NPL ratio under Decision 493/2005/QD-NHNN is 2.47 per cent however in reality the NPL ratio is up to 6 per cent under international standards.
As for Agribank, if following Decision 493, the NPL ratio is 2.3 per cent however if calculating the ratio based on international standards, this figure is 6-7 per cent.
According to the central bank, the majority of the bad debts of Vietnamese banks are not worrying.
Meanwhile, commercial joint stock banks book low bad loan ratios [mostly less than 1 per cent]. Even banks like the Vietnam Export and Import Bank (Eximbank) and the Vietnam Bank for Private Enterprises (VPBank) which have been free from special supervision by the central bank, report bad loan ratios of less than 3 per cent and 0.8 per cent respectively.
Ngoan admitted that it is currently difficult to precisely evaluate the bad debt levels of commercial banks.
Labour
Vietnamese
