VMAC buys $114 million of Agribank’s bad debts
VMAC buys $114 million of Agribank’s bad debts
After Agribank’s successful agreement to sell bad debts to the Vietnam Asset Management Company (VAMC), banks nationwide are anxious to do the same.
The VAMC signed an agreement with the Vietnam Bank for Agriculture and Rural Development (Agribank), the country’s largest lender, to buy $114 million of its bad debts.
The exchange will be made in the form of bonds value at $80.9 million as Agribank already provisioned a matching fund of $38 million. The purchase will resolve 27 bad loans taken out by 11 corporate customers.
An Agribank spokesperson said the deal would reduce their non-performing loans by 7.56 per cent. By the end of August the bank’s total outstanding loans were valued at $24.4 billion.
According to the State Bank of Vietnam (SBV), as of June 2012 6.1 per cent of the bank’s total loans were bad. The central bank is requiring lenders with bad debts above 3 per cent to sell a significant proportion to the VAMC.
Le Quoc Hung, deputy chairman of the VAMC, said the state corporation plans to sign bad debt bond contracts with other commercial banks within this week including Saigon Commercial Bank (SCB), Saigon Hanoi Bank (SHB) and Petroleum Bank (PGbank)
“These banks have at least VND1 trillion ($47.6 million) in bad debts and we will make purchases this week,” Hung said. “Also, another state-owned bank has also agreed to sell us bad debts.”
According to Hung, of 10 credit institutions requesting the VAMC buy their bad debts, 4 have a bad debt ratio of over three per cent. Seven have already submitted the required documents.
He explained that the VAMC will prioritise, in addition to banks with a bad debt ratio exceeding 3 per cent, state-owned commercial banks and those active in the restructuring process.
Regarding the VAMC’s plan to buy bad debts from Nam Viet Bank (Navibank), a source said that the transaction had not yet been completed due to incomplete records. Banks throughout the country have hundreds of overdue loans slated for sale to the state group.
The VAMC opened on July 26 as a wholly-state-owned business directed entirely at managing the bad debts of the financial industry. It has charter capital of $23.8 million and plans to buy and/or issue bonds on $1.6-$1.9 billion of bad debts inside of this year.
Bad debts stood at 7.8 per cent of total outstanding loans by the end of last year, reported the SBV.
In a report released last week, the Asian Development Bank (ADB) expressed its concerns that the VAMC lacks the capitalisation to achieve its goal.
“It is unclear if the government will provide additional funding for the asset-management company,” the ADB report said.
The report praised the establishment of the corporation but noted that its success relied on the support of legislative and policy reform that fall outside the purview of the central bank.
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