Bad debts in foreign currency as of Jul-end rise 1.24pct

Till the end of July, 2011, bad debts in foreign currency (mainly US dollars) accounted for nearly 2.9% of the total outstanding loans in foreign currency. The rise of foreign currency NPL (non-performing loan) was also higher than that in dong, according to data from the State Bank of Vietnam (SBV).
Credit in dong slow down, dollars rise

The group of commercial joint stock banks posted the second highest foreign currency credit growth after non-banking credit institutions (growing 4.64%), but due to accounting for nearly 52% of the whole banking system, so the increase or decrease in foreign currency credit of joint stock banks became the focus of attention of analysts.

In the first seven months of this year, the total outstanding loans in dong of joint stock banks reached over 1,000 trillion dong, or over 58% of the total outstanding loans of the entire banking system. The total outstanding loans in dong in July decreased by 0.34% from June. 23 commercial joint stock banks posted month on month fall in total outstanding loans in dong, of which, NamABank saw the biggest fall of 10.9% m-o-m.

Meanwhile, the total outstanding loans in foreign currency, mainly US dollars of joint stock banks in July increased 1.77% from June 2011, or nearly $265 million. In July, 23 joint stock banks posted high outstanding loans in foreign currency with the leading position belonging to NamABank. In addition, 16 other banks posted consecutive rises in outstanding loans of foreign currency in both June and July.

Totally from early this year to July, foreign currency credit growth of commercial joint stock banks increased 6.3 times against the rise in dong credit.

The second group with notable outstanding loans in foreign currency is state-run commercial banks namely Bank for Investment and Development of Vietnam (Bidv), Vietnam Bank for Agriculture and Rural Development (Agribank), Mekong Delta Housing Development Bank and Vietnam Bank for Social Policies (VBSP).

Till the end of July, the outstanding loans in foreign currency of this group reached 30.22% of the figure of the whole banking system, down 0.46% from June 2011 and up 2.44% over December 31, 2010. Although being the single group of the whole banking system posting fall in credit outstanding loans, of which, credit in dong decreased 1.15% but credit in foreign currency in July increased up to 3.54% from June, higher than the common growth of 1.99% of the entire banking system.

Particularly, till July, credit in dong of this group reached over 600 trillion dong, accounting for 34.3% of the whole banking system, down 1.15% from June 2011 and 0.24% against December 31, 2010.

NPLs in foreign currency surge

Till the end of July 2011, while the NPL in dong increased only 0.94%, the NPL in foreign currency surged 1.24% from December 31, 2010 and the NPL in foreign currency increased consecutively and higher than that in dong for five months from early this year till July.

Particularly, till the end of July, NPL in foreign currency accounted for nearly 2.9% of the total outstanding loans in foreign currency and the foreign currency NPL growth on total outstanding loans of foreign currency reached 1.24%.

Comparing NPL in dong and in foreign currency from July 2011 to December 31, 2010 showed: in the group of foreign banks (NPL in dong soared 0.3% but this ratio on foreign currency was 1.03%). Similarly, in the group of commercial joint stock banks, the ratio was 0.66% and 0.67% respectively and it was 1.55% and 3.52% in the group of state-run commercial banks.

About the issue of foreign currency NPL, there are some noteworthy points.

First, amongst organizations with surging foreign currency NPL ratio, there are some units posting noticeable rise such as Vinashin Finance Leasing Co. Ltd, Chailease Finance Leasing Co, ANZ Bank, Maybank and Southern Bank.

Second, the group of joint stock banks had total outstanding loans in dong at 58% of the total of the entire banking system total outstanding loans in foreign currency at 51% of the total. By month on month comparison, the debts in category 1 (standard debts) in June decreased 2.28% from May and the fall in July from June was only 1.29%.

Third, comparing August 31, 2011 to December 31, 2010, while total outstanding loans in dong increased only 6.94%, the total outstanding loans in foreign currency soared 21.79%. According to a senior leader of the central bank, as of September 7, 2011, credit growth in foreign currency of the entire banking system was about 25% and it is predicted at 30% by the year-end.

Source: Vietbiz24.com

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam forex market