Bad debts of Vietnamese banks account for 13pct of total outstanding loans: Fitch Ratings

Bad debt is corollary of the process of too hot credit growth in previous years, plus the lending fever for real estate and securities massively during 2006-2007.
Although the State Bank of Vietnam (SBV) has asked commercial banks to restrict too high credit growth, in fact, in recent 10 years, the credit growth has been always at over 20% per year (it was 19.2% only in 2006). Notably, in 2007, the credit growth was up to 51.39% and it was 37.7% in 2009 and slowed down to 29.8% in 2010. The loosening lending policy of the previous years has caused many corollaries, including the bad debt problems.

The deadline of June 30, 2011 is coming, but according to the SBV’s governor, about 20 commercial banks still have non-production loans of over 22% and even it is up to more than 50% in two lenders.

At the mid-term donors’ Consultative Group (CG) meeting for Vietnam held early June 2011, SBV’s deputy governor Nguyen Van Binh said the bad debt of banks increased from 2% to around 3% and in the worst case it is only less than 5% for the whole year. According to Binh, this is still a safe and controllable level.

However, as announced by Fitch Ratings, a global rating agency, the bad debt ratio of Vietnamese banks is 13% of the total outstanding loans according to the international standards (under the international standards, if the debts are not paid when due, the entire debt must be classified in bad debts). And the risk of bad debt will become clearer in late Q2 or early Q3 this year. – Vietbiz24

Tags: Bad debts, Vietnam banking industry, Vietnam finance, Vietnam financial

Posted by VBN on Jun 15 2011. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry