Hanoi (VNS/VNA) ಞ- Though many banks have posted positive profits in thefirst half of 2019, their bad debts have continually increased in the wake ofhigh credit growth in risky business segments.

Latestfinancial statements of 21 banks showed their total non-performing loans (NPLs)rose by nearly 7 trillion VND (300.4 million USD) against the beginning of thisyear to nearly 85.75 trillion VND by the end of June. Of thetotal NPLs, subprime debts had the highest growth of 22 percent whilepotentially irrecoverable debts increased by 5.2 percent, data on vneconomy.vn showed. In Vietnam,debts are classified into five groups based on their risk status: StandardDebt, Debt Needing Special Attention, Subprime Debt, Doubtful Debt, andPotentially Irrecoverable Debt. Regardingthe bad debt value, the Bank for Investment and Development of Vietnam (BIDV)had the highest rise in the period with a more than 2.3 trillion VND increaseagainst the beginning of last year. However,regarding the ratio of NPLs of total outstanding loans, the National CitizenBank (NCB) topped the list with the ratio up from 1.67 at the beginning of theyear to 2.75 percent by the end of June, of which the rise was mainly seen indoubtful debt from 168 billion VND to 443 billion VND. Expertsattributed the rise of bad debts to the high credit growth of the banks in thefirst half of the year, especially to retail segments such as consumer and homeloans that have high net interest margin (NIM) but also high risks. It wasreported that many banks have used up or almost used up their assigned creditgrowth limit set by the central bank for the whole year. According to banks’financial statements, nine banks posted a credit growth of more than 10 percentin the period though the central bank set a 14 percent credit growth target forthe entire banking system in 2019. Bankingand finance expert Nguyen Tri Hieu said that the main reason for banks’ baddebt increase is that banks’ recovery of bad debts accumulated in the previousyears has remained limited while in H1 they continually boosted lending. Accordingto Hieu, the profit increase of Vietnamese banks heavily depends on creditgrowth. The risks will be greater for loans with higher profits. These twofactors always go hand in hand. Sharingthe same view, Tran Hai Yen from the Bao Viet Securities Company’sMacroeconomic Research Division said that banks now tend to focus on retailactivities through the acceleration of consumer loans. This is a potentialfield that brings high profits because consumer loans are often unsecured withhigh interest rates, but the possibility to become irrecoverable debts is alsohigh. Industryinsiders said the rise of NPLs in H1 was also partly due to a return of NPLS tobanks after five years kept at the Vietnam Asset Management Company (VAMC) buthaven’t yet been settled. Accordingto the central bank’s policy on purchasing bad debts of banks, the VAMC hasissued special bonds to debt-selling banks with a term of five years since2015. If the bond matures but bad debt is not dealt with, it returns to thebanks in 2019. By theend of 2018, an estimated 340 trillion VND of NPLs was bought back by the VAMCwith special bonds. However, by the beginning of April 2019, the VAMC onlyhandled 190 trillion VND, accounting for more than 56 percent of the total baddebts bought by this organisation.-VNS/VNA