Vietnam says it cleared $4b of bad debt

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vietnam-stock-marketVietnam’s banking sector has cleaned up $4.02 billion worth bad debts since the end of 2012, bringing the debt ratio down to 4.68 per cent as of June, the State Bank of Vietnam governor Nguyen Van Binh said.

The bad debt ratio had been more than 8 per cent at the end of last year. However, the ratio is now still higher than the 4.46 per cent targeted by the central bank earlier.

This has partly to do with the fact that the industry is still waiting for the newly established Vietnam Asset Management Company (VAMC) to begin buying its bad debts. The central bank has set a bad-debt cap of 3 per cent for banks and requires them to sell off the rest to the VAMC.

Analysts are skeptical about the VAMC’s ability to make a dent on one of the highest levels of bad debt in Southeast Asia given the lack of transparency in estimates of non-performing loans. At the end of 2012, banks had reported bad debts to be at just half the level estimated by the governor then. International agencies like Fitch Ratings put the figure at double digits, much higher than the banks’ estimates.

Nguyen Hoang Minh, deputy director of the central bank’s Ho Chi Minh City branch, was quoted by the Saigon Times as saying that so far two banks – Navibank, whose bad debt ratio is 6.1 per cent, and ACB, 2.99 per cent – have announced plans to sell non-performing loans to the VAMC. But the VAMC is still awaiting government guidance on buying debts, he said.

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Reading Time: 1 minute

Vietnam’s banking sector has cleaned up $4.02 billion worth bad debts since the end of 2012, bringing the debt ratio down to 4.68 per cent as of June, the State Bank of Vietnam governor Nguyen Van Binh said.

Reading Time: 1 minute

vietnam-stock-marketVietnam’s banking sector has cleaned up $4.02 billion worth bad debts since the end of 2012, bringing the debt ratio down to 4.68 per cent as of June, the State Bank of Vietnam governor Nguyen Van Binh said.

The bad debt ratio had been more than 8 per cent at the end of last year. However, the ratio is now still higher than the 4.46 per cent targeted by the central bank earlier.

This has partly to do with the fact that the industry is still waiting for the newly established Vietnam Asset Management Company (VAMC) to begin buying its bad debts. The central bank has set a bad-debt cap of 3 per cent for banks and requires them to sell off the rest to the VAMC.

Analysts are skeptical about the VAMC’s ability to make a dent on one of the highest levels of bad debt in Southeast Asia given the lack of transparency in estimates of non-performing loans. At the end of 2012, banks had reported bad debts to be at just half the level estimated by the governor then. International agencies like Fitch Ratings put the figure at double digits, much higher than the banks’ estimates.

Nguyen Hoang Minh, deputy director of the central bank’s Ho Chi Minh City branch, was quoted by the Saigon Times as saying that so far two banks – Navibank, whose bad debt ratio is 6.1 per cent, and ACB, 2.99 per cent – have announced plans to sell non-performing loans to the VAMC. But the VAMC is still awaiting government guidance on buying debts, he said.

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