The bad debt panorama

Apr 13th at 14:50

13-04-2013 14:50:08+07:00

The reports from 10 State Bank’s local branches showed that Hanoi, HCM City and Da Nang are the localities with the highest bad debt ratios.

These are also the localities where the outstanding loans disbursed for the 5 priority business fields (agriculture and rural development, production and export, supporting industries, small and medium enterprises, and high technology enterprises) are lowered than that of other localities.
The loans in big cities did not go to production

According to Director of the HCM City Branch --To Duy Lam, the bad debts of the commercial banks in the city had accounted for 5.98 percent of the total outstanding loans by the end of February, of which the fifth group debts (the worst ones) had accounted for 62.8 percent of the total non-performing loans.

State owned banks, once again have been found as the banks with the highest bad debt ratio, 5.78 percent. The ratios were 5.6 percent for joint stock banks, 5.64 percent for joint venture banks. Foreign banks have been found as having the best performance with the low bad debt ratio of 2.29 percent.

Especially, finance companies reportedly had had the bad debt ratio of 19.54 percent, and the ratio of finance leasing companies was terribly high at 46.97 percent.

Despite the government’s great efforts to stimulate the demand, the real estate market has yet warmed up. This explains why real estate developers still cannot pay debts, and the real estate outstanding loans in HCM City remain high, estimated at VND88,480 billion, amounting to 10.4 percent of the total outstanding loans, and 6.13 percent of the loans to the real estate sector.

The report of the State Bank’s Hanoi branch showed that by the end of February 2013, the outstanding loans had reached 616,600 billion, amounting to 25 percent of the total outstanding loans to the whole national economy.

As such, Hanoi, which holds the biggest credit market share, the locality which gathers the highest number commercial banks and non-bank financial institutions, now tops the list of the localities with the highest bad debt ratios.

Da Nang has also been cited as the city with the high bad debt ratio.

Director of the State Bank’s Da Nang Branch -- Vo Minh, said the bad debts incurred by the banks in the city had reached VND2.143 trillion, or 4.22 percent of the total outstanding loans.

Bad debts in rural areas lower than in big cities

The bad debt ratios in smaller cities and urban areas are much lower than that in big cities, which has been attributed by the fact that the “real estate bubble” only occurred in big cities.

According to Tran Luyen, Director of the Quang Ngai provincial State Bank’s branch, by December 31, 2012, the bad debt ratio of the banks here just amounted to 1.46 percent of the total outstanding loans.

While the loans disbursed for farmers to serve agriculture production are believed to be risky, the reports have pointed out that that the localities with the big loans to the sector are the ones with the lowest bad debt ratios.

Quang Ngai, for example, saw 20.42 percent of its outstanding loans going to the agriculture sector.

Binh Duong province in the south, though having the record high deposit capital of VND75.8 trillion and high outstanding loans of VND53.6 trillion, has reported the low bad debt ratio of 2.13 percent.

US$1=VND21,000