Vietnam - NPL ratios increase sharply, worrying bankers

VietNamNet Bridge – A lot of commercial banks have faced the big non-performing loans (NPL) of up to trillions of dong by the end of the first quarter of 2012. A bank reportedly had seen the NPL triple that of early this year

The Q1 finance reports of some commercial banks show the same problem that while the outstanding loans decreased, the NPL ratios increased rapidly. The noteworthy thing is that this happened not only with small banks, but to big banks as well, including state owned banks, which are considered as strictly following safety lending procedures.

According to Dan tri newspaper, the finance report dated April 20, 2012, of Vietcombank, an equitized bank--showed that the pretax profit in the first quarter of the year dropped by 112 billion dong in comparison with the same period of the last year to 1662.85 billion dong. Besides, one could see worrying figures about the outstanding loans and NPL.

While the bank’s total outstanding loans decreased by 1195 billion dong from 208,085 billion dong to 206,890 billion dong, the 3-4-5th group debts had increased sharply by 40.69 percent to 5873 billion dong by March 31, 2012, in comparison with December 31, 2011 (the 5th group debt is considered the worst debt which may be irrecoverable).

This has raised the NPL ratio of the bank from 2 percent earlier this year to 2.84 percent. This would be a big challenge for the bank which strives to curb the NPL ratio at below 2.8 percent as committed by Vietcombank’s General Director Nguyen Phuoc Thanh recently.

However, Vietcombank still lags behind Vietinbank, also an equitized bank, in terms of the NPL growth rate. The Q1 finance report of Vietinbank shows that the total NPL of the bank has reached 139 percent, or double that at the end of 2011, increasing from 2165 billion dong to 5176 billion dong just after three months.

The highest growth rate of NPL can be seen in the fourth group debts, which increased from 200 billion dong to 817 billion dong, while the third group debts rose from 1053 billion dong to 3358 billion dong. As a result of the credit quality degrading, the bank has to make higher provisions against the bad debts, which increased from 2994 billion dong in late 2011 to 3738 billion dong.

Vietcombank and Vietinbank were both state owned banks, and though they both have been equitized, they are still referred to as state owned banks since the state is holding controlling stakes at the banks.

The NPL at private joint stock banks have also increased, though the NPL volume was lower than that of the big banks. Even Asia Commercial Bank (ACB), which was listed as one of the banks with the lowest NPL ratios in 2011, has also seen the sharp decrease in the credit quality.

The bank’s finance report released April 20, 2012 showed that the total outstanding loans of the bank increased by less than 1.8 percent, while the bad NPL ratio increased by 38.8 percent, from 873.4 billion dong in late 2011 to 1212.5 billion dong.

Dau tu chung khoan has quoted ACB’s General Director Ly Xuan Hai, who said at the bank’s shareholders’ meeting on March 30, that 60 percent of NPL of the bank relates to the loans to the real estate sector.

The NPL increases have also been reported by some other banks, including Eximbank (from 1202.9 billion dong to 1377 billion dong, 14.5 percent), and SHB (18.17 percent, 769.8 billion dong). While the outstanding loans decreased by 5 trillion dong in comparison with the beginning of the year, but the main sponsor for V-League got 174 billion dong more in NPL.

All the five banks have been listed as the first group banks, i.e. the best banks, which can have the credit growth rate of 17 percent in 2012.

One dollar is equal to 21,000 Vietnam dong.

C. V

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