HCM City banks face rising bad debt ratio

Eximbank's potentially irrecoverable debts made up 61.7 per cent of total bad debts, equivalent to VND1.458 trillion ($69.43 million), up 36 per cent from six months ago.- Photo nld

Non-performing loans had accounted for 4.65 per cent of total outstanding loans as of late July.

Even Vietcombank is faced with an increase in potentially irrecoverable debts despite being a major and highly experienced lender.

Dau Tu (Vietnam Investment Review) newspaper reported that the bank's second quarter financial statements reported total overdue debts of VND9.03 trillion ($425.07 million), or 3.09 per cent of the total outstanding loans. Of this, potentially irrecoverable debts were estimated at VND4.765 trillion ($224.28 million), up 70.7 per cent from early this year.

Eximbank's potentially irrecoverable debts made up 61.7 per cent of total bad debts, equivalent to VND1.458 trillion ($69.43 million), up 36 per cent from six months ago.

At Sacombank the figure has risen by 31 per cent, and consequently the bank had to make VND216.5 billion ($10.31 million) worth risk provisioning in the second quarter, up 368 per cent from the same period last year.

Nguyen Hoang Minh, deputy director of the SBV's HCM City Branch, attributed the rise in "potentially irrecoverable debts" in the first seven months to banks' classification of debts and risk provisioning in accordance with Circular No 09/TT-NHNN.

Banks have already sold or written off bad debts worth VND8 trillion ($380.95 million) but their non-performing loans remain at high levels.

They have found it very difficult to recover debts in cash or sell collateral, Minh explained.

They are resorting to increasing risk provisioning and selling bad debts to the Viet Nam Asset Management Company, he said.

In the first eight months of this year banks sold over VND1 trillion ($47.08 million) worth of bad debts to the VAMC, and are expected to sell more before the year is out, he added.

Tran Du Lich, a member of the National Monetary and Financial Policy Advisory Council, said banks' bad debts amounted to 4.17 per cent of total outstanding loans as of late August.

About VND210 trillion ($9.9 billion) worth of non-performing loans have been disposed of one or the other, leaving VND161 trillion ($7.67 billion) worth of bad debts, including newly arisen debts.

"Bad debts are spreading through the economy and so the flow of capital is slower. Because of this, we cannot expect to dispose of all bad debts within a certain time," Lich said.