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Banking & Finance

Bad debt ratios fall unexpectedly

Released at: 16:15, 22/01/2015

Bad debt ratios fall unexpectedly

Bigger banks seem to have cut their bad debt ratios significantly, but weaker banks are yet to release their 2014 figures.

As at November 2014, the non-performing loan (NPL) ratio as reported by Vietnamese banks stood at 3.8 per cent. Figures from the Information Center of the State Bank of Vietnam (SBV), however, put the ratio at 5.3 per cent, according to Ms. Nguyen Thi Hong, Deputy SBV Governor.

Based on the latter, the bad debt ratio did not fall compared to the end of 2013 (3.79 per cent), but based on the former there was a significant reduction over the course of 2014.

Big banks do better

Vietcombank recently announced bad debts, as at December 31, 2014, of VND7.4 trillion ($352.38 million), accounting for 2.29 per cent of all loans and a decline of 0.4 per cent compared to 2013.

In the second half of the year the bank’s bad debt was cut by trillions of VND. According to its Q2 report, Vietcombank’s bad debts were VND9 trillion ($428.57 million), accounting for 3.09 per cent of all loans. Debts that may likely be never recovered (Group 5) were VND4.76 trillion ($227 million), an increase of nearly 71 per cent over the same period of 2013.

According to Vietcombank, the significant turnaround was due to selling nearly VND1.3 trillion ($61.9 million) in bad debts to the Vietnam Asset Management Company (VAMC) and its ability to collect bad debts.

The 2014 NPL figures were also quite positive at other banks. BIDV announced a bad debt ratio of 1.8 per cent, Tien Phong Bank 1 per cent, and MB Bank 2.73 per cent.

According to unofficial sources, VietinBank’s bad debt ratio as at the end of 2014 was 1.3 per cent.

Of course, this is just the bad debts of healthy banks. The overall picture of bad debts will come into clearer view when the NPL ratios of weak and medium-sized banks are announced. It should be noted, though, that bad debt collection in the banking industry recovered significant in 2014. For instance, Vietcombank and VietinBank handled about VND3 trillion ($142.85 million) compared to VAMC’s VND4 trillion ($190.47 million).

Hung Nguyen

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