Bad debt settlement in Vietnam process slowing down
Banks’ nine-month financial reports show that bad debts have increased compared with the beginning of the year, though the bad debt ratio has fallen.
A report released at the conference on reviewing the two-year implementation of the National Assembly’s Resolution 42 on settling bad debts showed that from August 15, 2017, when Resolution 42 took effect, to August 31, 2019, credit institutions settled VND236.8 trillion worth of bad debts, which means that VND9.6 trillion was settled a month, higher than the VND4.7 trillion a month in 2012-2017.
The report released at the conference on reviewing the one-year implementation of the resolution, which took place one year before, showed that the amount of bad debts settled in the period from August 15, 2017 to June 30, 2018 was VND138.3 trillion, or VND13.8 trillion a month.
As such, the bad debt settlement process seems to have slowed down.
The value of bad debts has increased compared with the beginning of the year, though the bad debt ratio has decreased.
|Banks’ nine-month financial reports show that bad debts have increased compared with the beginning of the year, though the bad debt ratio has fallen.|
The bad debt in the balance sheet of Viet A Bank had reached VND481 billion by September 30, an increase of VND38 billion compared with the end of 2018. VIB has the bad debt ratio decreasing from 2.52 percent to 2.04 percent, but its value of bad debts increased by 4 percent to VND2.517 trillion.
Bac A reported bad debt of VND504 billion by September 30, an increase of VND15 billion compared with the beginning of the year.
As for ABBank, the bad debt unexpectedly soared by 79 percent to VND1.766 trillion, which means the ratio of NPL to outstanding loans has surged from 1.89 percent to 3.39 percent. This includes VND1 trillion worth of fifth-group debt, a sharp rise of 56 percent compared with the same period last year.
This, plus the minus growth rate of 0.05 percent of outstanding loans, has pushed the bad debt ratio up, exceeding the safety line of 3 percent.
NCB has not provided detailed information about the bad debt, but said in the first nine months of the year, it had to make a provision of VND33 billion against risks.
Saigon Bank had balance-sheet bad debt decreasing by VND7 billion to VND294 billion, but its fifth group debt (the worst debt) reached VND211 billion, accounting for a high proportion of 72 percent of total bad debts.
MBBank is another bank which saw an increase in the fifth group bad debts. Its bad debt ratio is at 1.35 percent, higher than 1.22 percent in late 2018, while the bad debt value increased by 23 percent to VND577 billion. Of this, the fifth group bad debt increased by VND386 billion to VND1.345 trillion.
The central bank warned commercial banks of this issue two years ago.
The banking sector had made considerable headway into settling bad debt, restructuring credit institutions and developing the banking system two years since the National Assembly issued a resolution on the industry.