Transactions at Vietcombank (Photo: VNA)Hanoi (VNS/VNA) - The number of non-performing loans (NPLs) at many bankshas decreased dramatically in the past few months, with some even posting adecline of more than half.
Accordingto banks’ financial reports, by the end of 2018, total NPLs of 15 banks,including VPBank, Vietcombank, Sacombank, MBBank, Techcombank, VIB,LienVietPostBank, ACB, ABBank, TPBank, PGBank, BacABank, VietBank, Saigonbankand Kienlongbank, dropped by 17.7 percent against the end of the third quarterof 2018 to more than 34.81 trillion VND (1.48 billion USD).
Thedecline was unexpected as NPLs reportedly increased significantly in the firstthree quarters of last year.
Saigonbankwas the most unexpected case when its NPLs in the fourth quarter dropped by upto 66 percent against the previous quarter, which helped the bank’s NPLs standat 301 billion VND by the end of 2018. The result contributed to reducing thebad debt ratio at Saigonbank from 2.98 percent at the end of 2017 to 2.2 percentat the end of 2018.
Saigonbank’srepresentatives attributed the success to the bank’s focus on debt handlingunder a scheme approved by the State Bank of Vietnam (SBV).
Anothersmall bank which saw a positive change in dealing with bad debts in the lastthree months of 2018 was PGBank, whose bad debt ratio dropped to below 3 percentat the end of 2018 against 4.5 percent at the end of September 2018.
Largebanks such as VPBank, Vietcombank, Techcombank, MBBank, ACB and Sacombank alsoreduced large amounts of bad debts in the last months of 2018.
AtVPBank and its subsidiaries, for example, after climbing to 4.7 percent at theend of September last year, the bad debt ratio fell to 3.5 percent at end ofthe year, of which the rate of the parent bank was below 3 percent.
Baddebts at Vietcombank also reduced by more than 1.2 trillion VND in thefourth quarter of 2018, helping the bank’s bad debt ratio stand at only 0.98 percent,the lowest level in the entire banking system.
Sacombankwas also a bank that focused dramatically on bad debt handling last year. Afterone year, the bank’s NPLs plummeted by 48 percent to 5.4 trillion VND. Theresult helped its bad debt ratio on total outstanding loans drop from 4.7 percentin early 2018 to 2.11 percent at end of the year.
Withefforts made by banks in bad debt settlement in the last quarter of 2018, the entirebanking system handled 149.22 trillion VND of NPLs last year, bringing thebad debt ratio of the system to 1.89 percent at the end of 2018, down from 1.99percent at the end of 2017 and 2.46 percent at the end of 2016, according toreports by the central bank.
Thebad debt ratio also hit the lowest level since 2012 and was below the thresholdof 2 percent targeted for the end of 2019 according to Resolution 01 issued bythe Prime Minister in early last year.
Accordingto experts, bad debt is always one of the key indicators to assess banks’health. Thus, besides big profit, the positive change in bad debt over the pastyear has confirmed the bright picture of the banking sector.
However,experts also noted that besides handling old bad debts, banks must continuefocusing on controlling credit quality in order to prevent new bad debts fromarising.
Accordingto SBV Governor Le Minh Hung, the central bank will continue implementingpolicies to restructure the banking system and deal with bad debts, consideringit among the SBV’s top priorities in 2019.
Accordingly,Hung has directed credit institutions to review and provide detailed roadmapsand solutions for settling their bad debts every year until 2022.
Creditinstitutions are also required to actively look for buyers for the debts theysold to the Vietnam Asset Management Company (VAMC) while the VAMC must speedup the handling of bad debts and collateral that the company purchased followingmarket-based mechanisms.-VNS/VNA
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