VietNamNet Bridge – Struggling against weak efficiency and a
heavy load bad debts, Vietnamese finance companies are finding ways to
restructure.
Currently, besides six 100 per
cent foreign owned companies operating in the field of consumer credit, Vietnam
has 12 state-owned finance companies established in late 1990s. However, the
companies, which are the subsidiaries of state groups and commercial banks,
have been mainly serving the operation of the parent groups, and are not
allowed to provide loans to individuals.
Until June 30, 2012, the bad debt
of finance companies made up 12.27 per cent of outstanding loans and 7.2 per
cent of the total bad debts in the whole system, according to the National
Financial Supervisory Commission.
Vu Hoang Chuong, investment and consultant
manager of EVN Finance Company under the Electricity of Finance, said that the
model of Vietnamese finance companies was inefficient and need restructuring,
or perhaps even removed.
“Vietnamese finance companies
cannot compete with banks and operate in very small market segment. Besides,
its capital scale is too small, mostly around hundreds of billions of dong,”
said Chuong.
Currently, among 12 Vietnamese
finance companies, PetroVietnam Finance (PVFC) with charter capital of VND6
trillion ($288 million) and EVN Finance (EVFC) with VND2.5 trillion ($128
million) are two biggest companies in term of charter capital, most of the
remaining had charter capital of only several hundred of billions of dong, not
equivalent with a current medium-sized enterprise.
Recent years also saw inefficient
operation of many finance companies. In the first nine months of 2012, PVFC
reported the net profit of VND183 billion, down by 41.2 per cent year-on-year.
Its bad debt till September 30, 2012 reached up to 4.35 per cent, nearly double
that in whole 2011 with 2.3 per cent, according to its financial statement.
Meanwhile, in 2011, the Rubber
Finance Company reported losses of VND200 billion ($9.6 million). EVN Finance,
after difficulties in business in 2011, planned for modest business results for
2012 with VND2.3 trillion ($110 million) in revenue, down 23 per cent against
2011’s actual figure, while total asset expected to decrease 17 per cent to
$722.7 million in 2012.
Dao Van Hung, director of the
Academy of Policy and Development under the Ministry of Planning and
Investment, said finance companies were now the place for state groups to both
invest and mobilise capital for lending mainly to its members under the groups.
“Therefore, the loan quality of
these companies was often low with high risks of instability,” said Hung.
Currently, under the government’s
direction, state groups and corporations are setting up their restructuring
plan under which withdrawal of capitals from their non-core businesses would complete
by 2015, and this also puts pressure on financial companies to restructure in
order to stay alive and develop.
Source: VIR
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