More banks to repurchase bad debts from VAMC
More banks to repurchase bad debts from VAMC
After a period of actively selling non-performing loans to the Viet Nam Asset Management Company (VAMC), banks are buying back the debts from the VAMC to self-handle.
Han Ngoc Vu, CEO of the Vietnam International Bank (VIB), recently said that in 2016 his bank repurchased VND1.33 trillion (US$58.3 million) of non-performing loans (NPLs) that it sold to VAMC. It will continue to buy back roughly VND1 trillion this year.
VIB is due to acquire all bad debts that it sold to VAMC by mid-2018, Vu said.
VIB’s NPL ratio increased to 2.58 per cent in 2016 from 2.05 per cent in 2015.
According to Vu, the increase in the 2016 NPL ratio was due to the bank actively acquiring some debts sold to VAMC to promote the debt settlement process on finding that the process had been better than the previous period.
Even when repurchasing the bad debt from VAMC, the entire bad debt of VIB is still less than 3 per cent regulated by the central bank, Vu said.
Previously, Vietcombank’s Chairman Nghiem Xuan Thanh had also said that his bank finished the repurchase of all VND4.3 trillion of NPLs that it sold to VAMC, three years earlier than planned.
Vietinbank Chairman Nguyen Van Thang said that in 2017 his bank would focus on settling bad debts and would buy all bad debts that it sold to VAMC, completely settling the bad debts in 2017 instead of 2018 as planned earlier.
Experts said that the repurchase of bad debts from VAMC was positive, proving that business performance of commercial banks is more positive.
However, according to Vu, not all banks can buy back bad debts from VAMC. He explained though some may really want to buy back the bad debts, these banks must have sufficient financial resources and the NPL ratio must be low enough to ensure that after the debt repurchase, the NPL ratio is still less than 3 percent as regulated by the central bank.
“There are going to have banks that face limitations as the NPL ratio at the banks has already been too high or the banks do not have enough profits to put provision, therefore, they still have to continue leaving bad debts at VAMC,” Vu told Dau tu chung khoan (Securities Investment) newspaper.
In fact, banks have identified VAMC as a bad debt “landing” as the recovery of the debts at VAMC is slow. The banks therefore must take the initiative in handling the debts by themselves.
According to VAMC, it has bought bad debts of VND262 trillion from 42 credit institutions. However, it has recovered only VND42.85 trillion of book bad debts.
Economist Vu Dinh Anh said that apart from the barrier regarding financial resources to purchase and dispose bad debts, legal regulations, especially procedures on settlement of collaterals, are not suitable in reality as they create an awkward situation for VAMC, and are unable to accelerate the bad debt settlement process.
VIB’s Vu said the annual bad debt settlement is very good, especially the sale of bad debt. However, currently, there are still certain obstacles in selling bad debts to foreign buyers. When foreigners decide to purchase bad debt, that means they have professional perspective, they will consider bad debt quality with regard to collaterals and transparency, and see how much can be recovered before deciding to purchase.
Many foreigners have been interested in VIB’s bad debts for a long time, Vu said. However, commercial conditions have been negotiated and legal obstacles remain. Therefore, if it can be solved, VIB’s bad debt settlement speed will be much faster than today, he said.
