Business
Banks find support to completely tackle bad debt at VAMC
Macroeconomic stability together with new regulations in a National Assembly resolution effective last year will give banks huge opportunities to completely resolve their legacy problem assets kept at the Vietnam Asset Management Company (VAMC).
According to banking expert Bui Quang Tin, banks are fully capable of dealing with non-performing loans (NPLs), which they earlier sold to the VAMC, next time thanks to the warming of the real estate market as most of these debts have collaterals in the form of real estate assets.
Previously, banks had to sell the debts to VAMC to keep their NPL ratio below 3 percent as regulated by the central bank, but they still have to spend provision for the debts. In fact, banks have identified VAMC as a bad debt “landing” as the recovery of the debts at VAMC is slow. The banks therefore have taken the initiative in handling the debts by themselves.
Meaningful progress
Vietcombank was the first bank to buy back bad debts it had earlier sold to VAMC to tackle them itself. Accordingly, in 2016, the bank bought VND4.3 trillion (US$191 million) of bad debts from VAMC and tackled them with its own resources.
As of December 31, 2017, Vietcombank reported a 1.1 percent bad debts rate, the lowest in the banking system. Its provision fund came to around VND8.113 trillion ($360.5 million), 1.3 times more than the volume of its bad debts.
Treading in Vietcombank’s footsteps, other banks are also stepping up efforts to buy back bad debts from VAMC to mitigate the bad debt threat.
In 2016, privately-held Vietnam International Bank (VIB) bought 30 percent of the bad debt volume it had sold to VAMC. Last year, the bank bought back an additional VND1 trillion ($44.4 million) worth of debts and is set to buy back the remaining debts it had sold to VAMC in the middle of the year.
At its recent annual shareholders’ meeting on March 31, 2018, chairman at Ho Chi Minh City-based OCB Trinh Van Tuan also said the bank’s bad debts rate was cushioned to 1.48 per cent by the end of last year and its bad debts at VAMC remained at VND728 trillion ($32.3 million).
The bank’s bad debts rate rose to 2.16 per cent if the debt volume at VAMC was taken into account.
A bank source revealed that OCB is likely to buy back its entire VND728 billion ($32.3 million) worth of bad debts at VAMC this year and will have no need to set up a provisions fund.
According to SCB’s general director Vo Tan Hoang Van, the National Assembly’s Resolution No.42/2017/QH14 which has piloted bad debts settlement leveraging new breakthrough measures and more favorable market conditions have facilitated banks’ efforts in tackling bad debts.
SCB succeeded in taking back and tackling about VND4 trillion ($177 million) worth of bad debts last year and set the figure at VND4-5 trillion (US$177 million- US$222 million) this year.
According to privately-held VPBank executives, they completed taking back nearly VND3 trillion ($133.3 million) of bad debts last year, including around VND1.1 trillion ($48.8 million) of VAMC debts.
Thanks to the move, the ratio of non-performing loans (NPLs) of all credit institutions reduced significantly to 9.5 percent at the end of last year from 11.9 percent at the end of 2016, according to the National Financial Supervisory Commission.
Of the total, debt volume of Group 5, which might not be recovered, at the end of last year shed 8.3 per cent compared to the beginning of the year, falling to VND20.725 trillion ($921 million).
OCB’s bad debts rate was cushioned to 1.48 per cent by the end of last year.
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Previously, banks had to sell the debts to VAMC to keep their NPL ratio below 3 percent as regulated by the central bank, but they still have to spend provision for the debts. In fact, banks have identified VAMC as a bad debt “landing” as the recovery of the debts at VAMC is slow. The banks therefore have taken the initiative in handling the debts by themselves.
Meaningful progress
Vietcombank was the first bank to buy back bad debts it had earlier sold to VAMC to tackle them itself. Accordingly, in 2016, the bank bought VND4.3 trillion (US$191 million) of bad debts from VAMC and tackled them with its own resources.
As of December 31, 2017, Vietcombank reported a 1.1 percent bad debts rate, the lowest in the banking system. Its provision fund came to around VND8.113 trillion ($360.5 million), 1.3 times more than the volume of its bad debts.
Treading in Vietcombank’s footsteps, other banks are also stepping up efforts to buy back bad debts from VAMC to mitigate the bad debt threat.
In 2016, privately-held Vietnam International Bank (VIB) bought 30 percent of the bad debt volume it had sold to VAMC. Last year, the bank bought back an additional VND1 trillion ($44.4 million) worth of debts and is set to buy back the remaining debts it had sold to VAMC in the middle of the year.
At its recent annual shareholders’ meeting on March 31, 2018, chairman at Ho Chi Minh City-based OCB Trinh Van Tuan also said the bank’s bad debts rate was cushioned to 1.48 per cent by the end of last year and its bad debts at VAMC remained at VND728 trillion ($32.3 million).
The bank’s bad debts rate rose to 2.16 per cent if the debt volume at VAMC was taken into account.
A bank source revealed that OCB is likely to buy back its entire VND728 billion ($32.3 million) worth of bad debts at VAMC this year and will have no need to set up a provisions fund.
According to SCB’s general director Vo Tan Hoang Van, the National Assembly’s Resolution No.42/2017/QH14 which has piloted bad debts settlement leveraging new breakthrough measures and more favorable market conditions have facilitated banks’ efforts in tackling bad debts.
SCB succeeded in taking back and tackling about VND4 trillion ($177 million) worth of bad debts last year and set the figure at VND4-5 trillion (US$177 million- US$222 million) this year.
According to privately-held VPBank executives, they completed taking back nearly VND3 trillion ($133.3 million) of bad debts last year, including around VND1.1 trillion ($48.8 million) of VAMC debts.
Thanks to the move, the ratio of non-performing loans (NPLs) of all credit institutions reduced significantly to 9.5 percent at the end of last year from 11.9 percent at the end of 2016, according to the National Financial Supervisory Commission.
Of the total, debt volume of Group 5, which might not be recovered, at the end of last year shed 8.3 per cent compared to the beginning of the year, falling to VND20.725 trillion ($921 million).
