Irrecoverable debts of banks on the rise

Irrecoverable debts of banks on the rise

The State Bank of Vietnam (SBV) on July 12 said that as of May 31, 2012, bad debts (according to the report of credit institutions) were 117 trillion dong, accounting for 4.47 percent of the total loans.

However, according to the monitoring results of inspection agency (under SBV), as of March 31, 2012, bad debts were more than 202 trillion dong, accounting for 8.6 percent of the total loans.

Surveying the unconsolidated fiscal statement of six listed banks namely Vietnam Commercial Joint Stock Bank for Foreign Trade (Vietcombank-VCB), Vietnam Commercial Joint Stock Bank of Industry and Trade (VietinBank-CTG), Asia Commercial Joint Stock Bank (ACB), Military Commercial Joint Stock Bank (MB), Vietnam Export Import Commercial Joint Stock Bank (Eximbank-EIB) and Nam Viet Commercial Joint Stock Bank (Navibank-NVB) showed that till June 30, the total outstanding loans of these six banks reached 753.25 trillion dong, total bad debts were 18.942 trillion dong, equalling to 2.51 percent of the total loans.

Calculation showed that amongst these six aforementioned listed banks, Navibank posted the highest bad debts ratio with3.86 percent and followed by Vietcombank (3.47%), VietinBank (2.45%), MB (1.82%), Eximbank (1.73%) and ACB (1.53%).

Notably, VietinBank’s unconsolidated fiscal statement showed that as of June 30, VietinBank’s irrecoverable debts (debts in Category 5) were up to 2.254 trillion dong, rising 147 percent against 912.45 billion dong in early this year.

Similarly, at Vietcombank, its irrecoverable debts as of June 30 were 3.897 trillion dong, growing over 71 percent versus 2.277 trillion dong in the end of last year. Notably, Vietcombank’s bad debts (debts in Category 3 and 5) surged sharply to 7.43 trillion dong, equalling to the bad debts ratio of 3.47 percent regardless of the bank’s credit growth being widened by 2.95 percent from early this year.

At ACB, its irrecoverable debts were up to 607 billion dong, soaring 104.15 percent over the level of 297.33 billion dong in the end of last year.

Considering Navibank, its irrecoverable debts till the end of the second quarter of 2012 climbed to 231 billion dong, jumping 33 percent from 174.4 billion dong in the end of last year.

Although the absolute figures of irrecoverable debts of many banks were not too high in comparison with their profit, the general growth rates of bad debts in general and irrecoverable debts in particular are raising the warning that cannot be ignored.

And due to increasing bad debts, many banks have to spend more on their credit risk provision, resulting in year-on-year decline in profit of these banks

Vietbiz24