Sunday, 22 Sep 2019

Vietnam’s banking sector tames bad debt ratio well below 3% target:

Updated at Friday, 24 May 2019, 16:46
The Hanoitimes - In 2019, the central bank aims to bring down the bad debt ratio in the sector to below 2%, and the ratio of bad debts and potential loan losses at below 5%.
Vietnam’s banking sector cleared VND163.14 trillion (US$7 billion) in bad debts in 2018, pulling down the bad debt ratio to 2.02% and on track to meet the target below 3% by 2020 set by the State Bank of Vietnam (SBV), the country's banking regulator. 
Illustrative photo.
Illustrative photo.
According to the SBV, a total of VND907.3 trillion (US$38.81 billion) of bad debts was cleaned up from 2012 to late March. Non-performing loans and other debts with risk of becoming bad debts accounted for 5.88% of total credit, significantly lower than the rate of 10.08% and 7.36% recorded at the end of 2016 and 2017, respectively. 

The SBV in its report also suggested Resolution No.42, which came into effect last August providing special pilot treatment of bad debts at credit institutions, has been pivotal in restricting the bad debt ratio at below 3%. 

The government-run National Financial Supervisory Commission (NFSC) cited reports from credit institutions showing a slight decrease in the bad debts ratio from 2.5% at the end of 2017 to 2.4% at the end of 2018. Provisions for credit losses increased by 30.1% during this period. 

Most of the 17 exchange-listed banks in Vietnam posted bad debt ratio at 1 – 2%, some even managed the ratio at below 1%, including Asia Commercial Bank (ACB) with 0.73%, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) with 0.97%, Military Bank (MB Bank) with 1.33%, Ho Chi Minh Development Bank (HDBank) with 1.45%, and Tien Phong Commercial Bank (TPBank) with 1.89%. 

Additionally, a number of listed banks also recorded the highest growth in profit in the banking sector last year, such as Vietcombank, HDBank, and TPBank with over their profit growing more than 60%. 

As of March 31, state-run Vietcombank posted bad debts at VND6.95 trillion (US$298.59 million), up VND700 billion against the beginning of the year and leading to an increase of bad debt ratio from 0.97% to 1.03%. Last year marked the first time Vietcombank took its bad debt ratio to below 1% since its privatization. 

Meanwhile, the bad debt ratio at HDBank continued the declining trend, reaching 1.45% in the first quarter.

According to banking experts, the bad debt ratio of the banking sector tended to go up since the last third quarter, but the rate was still below the 3% target as of the first quarter. 

In 2019, the SBV sets to control the bad debt ratio in the sector at below 2%, and the ratio of bad debts and potential loan losses at below 5%. 
Ngoc Mai
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