VietNamNet Bridge – The finance reports released by many commercial banks showed that their bad debt ratios have fallen down sharply to below 3 percent. This spells that the Vietnam Asset Management Company VAMC, established to help set banks free from bad debts, will have no job to do.

Bad debts slide suddenly

The reports by the State Bank of Vietnam and commercial banks showed that a lot of banks in the top 10 had the bad debt ratios higher than 3 percent in 2012.

Agribank, for example, had the bad debt ratio accounting for 5.8 percent of the outstanding loans, VND27,083 billion. SHB had the high bad debt ratio at 8.53 percent, or VND4.844 trillion, because it “inherited” Habubank’s bad debts after the merger.

Of the small banks, Western Bank had the highest ratio of bad debt, 6.89 percent, while Navibank’s ratio was 5.6 percent and Dai A Bank 4.4 percent. Bao Viet Bank had VND400 billion worth of bad debt, or 5.94 percent of outstanding loans.

The bad debt ratios had increased significantly by the end of the first quarter of 2013. The State Bank then reported that 30 out of the 124 banks had the bad debt ratios higher than 3 percent.

Therefore, the information that a lot of banks have successfully reduced the bad debt ratio to below 3 percent is really surprising.

The finance report of BIDV released on August 12 showed that the pure profit from business before it makes provisions against risks increased by two folds to VND5.217 trillion, while the post tax profit reached VND2 trillion, an increase of VND600 billion.

As for Southern Bank, the profits from the securities investment activities have helped make the total profit of the bank soar from VND180 billion to VND637 billion. This allows the bank to obtain the post tax profit of VND189 billion, which is 5 times higher than that of the same period of 2012 despite the increases of input costs. The bank’s non-performing loans accounted for 2.77 percent of the outstanding loans.

Meanwhile, ACB has become the first bank which made public about its bad debt. It said it has VND3.090 trillion worth of bad debts of which it is willing to sell VND1.5 trillion to VAMC.

Banks try to hide bad debts?

Commenting about the bad debts, analysts said some banks might have succeeded in reducing the bad debt ratios after the great efforts of collecting debts, but they still think there’s something “fishy.”

Lawyer Truong Thanh Duc, Chair of the Legal Club of the Vietnam Banking Association keeps doubtful about the great success of banks in reducing bad debts.

“The bad debt ratio of the banking system could be as high as 30 percent, while optimists say the ratio is 20 percent at least. Meanwhile, a lot of banks reported less than 3 percent, and the State Bank said 4.65 percent,” Duc said.

“If it is true that the bad debt ratio is at such a low level, it’s no need for Vietnam to establish VAMC to help banks settle debts,” he commented.

Duc personally thinks that the current bad debt ratio is between 11.5 and 20 percent, after banks made the rollover, i.e. they provided new loans to clients, so that the clients can pay due debts.

Tien Phong