Bad Debts on the Rise: Banks to Be Blamed

Bad debts in Vietnam’s banking sector rose to VND75 trillion or 3.04% of the total outstanding loans as of June, 2011, up 50% YoY. Banks are liable to the rise as they set high lending rates and exposed much in real estate loans.
Bad debts in Vietnam’s banking sector rose to VND75 trillion or 3.04% of the total outstanding loans as of June, 2011 versus 2.16% at end-2010, Deputy Chairman of Vietnam’s National Financial Supervisory Committee, Le Xuan Nghia said.
The State Bank of Vietnam (SBV), the country’s central bank, estimated the ratio to arrive at 5% in the worst scenario. However, the actual figure may be much higher as Fitch Rating estimated it to reach 13%, according to a recent analysis of the National Center for Socio-economic Information and Forecast (NCSEIF).
The Bank for Agriculture and Rural Development (Agribank)’s NPL ratio was reported at 6.67%, and the Bank for Foreign Trade of Vietnam (Vietcombank)’s at 3.47%. The Bank for Investment and Development of Vietnam (BIDV) also uncovered its NPL at 2.59%, beyond its target of 2.5% and estimated this ratio to come closer to 3%.
The rise in bad debts mainly came from banks’ high proportion of real estate loans. In many commercial banks, real estate projects accounted for 30-40% of their total outstanding loans and at some banks this figure was as high as 50%. As property slumps, banks become more exposed to bad debts.
As of March, 2011, total outstanding loans by credit institutions reached VND 2,390 trillion (or USD 114.74 billion), of which real estate debts accounted for 10.8%. Bad debt arising from real estate loans was 4%, higher than the average NPL of banks, Nghia alerted.
In addition, the lending interest rates were pushed by commercial banks up to 20-25% per annum. Unfavorable economic conditions along with skyrocketing interest rates forced 4700 enterprises into dissolve, cited a report by the Ministry of Planning and Investment (MPI), which worsened the situation and increased bad debts in banks. Bad debts will become more obvious in the last quarter of the year when all enterprises have to try their utmost to repay their debts to banks, Nghia added.
The central bank thus was asked to implement tighter monetary policies, focus on controlling bad debts especially at commercial banks with high real estate debt exposure and find ways to pull down interest rates in line with easing inflation.”-Source:StoxPlus.com”

Tags: Bad debts, Bad debts in Vietnam, Bad debts in Vietnam's banking sector rose, the State Bank of Vietnam (SBV), Vietnam banking industry, Vietnam banking sector, Vietnam finance, Vietnam financial, Vietnam's banking sector

Posted by quynhdn on Oct 2 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