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Banking & Finance

Bad debt ratio falls in first half

Released at: 10:49, 15/08/2016

Bad debt ratio falls in first half

Photo: Duc Anh

Fall largely attributed to debtor repayments, together with debts being shifted to the VAMC, risk provision, and rising outstanding credit.

by Hung Nguyen

The bad debt ratio of Vietnam’s banking system as at June 31 fell to 2.58 per cent from 2.78 per cent at the end of May, according to a State Bank of Vietnam report released on August 11.

The decline came partly from moving to debts to the Vietnam Asset Management Company (VAMC), risk provisions, debtor repayments, and increasing outstanding credit.

Total bad debts handled stood at VND59.71 trillion in the first half, 14.55 per cent lower year-on-year, SBV reported, based on final figures from the VAMC and financial institutions.

VND8.88 trillion ($394.68 million) in bad debts were moved to the VAMC in the first half. Financial institutions used VND7.24 trillion ($324.71 million) in risk provision to handle bad debts, while the decline was mostly due to debtor repayments of VND30.97 trillion ($1.38 billion).

Credit growth also increased strongly in the first half, bringing down the bad debt ratio. It increased 8.16 per cent compared to December 31, 2015 and as at July 29 had increased 5.54 per cent.

At the press conference releasing the report, Mr. Nguyen Tien Dong, Director General of the Credit Department at the SBV, said the target for credit growth this year is 18 to 20 per cent.

Credit grew at 17.6 per cent year-on-year in the first half, slightly lower than the central bank’s annual target of 18-20 per cent. A third of all outstanding loans were to the industry sector, with another 9.5 per cent in the construction sector, a Standard Chartered Bank (SCB) report released on August 9 revealed.

GDP, inflation and current account forecast

According to HSBC’s latest Vietnam at a Glance report, first half credit growth reflected solid domestic demand (in particular investment) and is expected to surpass the targeted annual growth rate of 18-20 per cent.

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