Improved economy helps Vietnamese banks

Hanoi (VNA) - Improved macroeconomic stability was likely to help Vietnamese banks curb new non-performing loans (NPL), Fitch Ratings said in its latest Asia-Pacific Banks Chart of the Month report on Vietnam.

A sustained improvement in the domestic property sector and measures to increase foreign property ownership may also be positive developments for collateral recovery, the US rating agency said.

According to government data, the NPL ratio in the Vietnamese banking system fell to 2.93 percent at the end of September, below the 3 percent target set to be achieved by the end of 2015.

However, Fitch also said the asset quality of the Vietnamese banking system remained a concern, despite the recent implementation of effective regulations that helped align loan-classification standards across banks.

The gradual enforcement of asset classification based on data by the State Bank of Vietnam's Credit Information Center (CIC) should reduce discrepancy in loan classification standards across banks in the country.

Since April 2015, Vietnamese banks are required to classify loan quality according to the lowest rating assigned to each borrower by creditors, as collated by the CIC.

Fitch said this was a positive step, but long-standing asset-quality issues in the system remained unresolved, underlined by significant outstanding problem loans, which were understated by reported NPL ratios.

The recovery rates for bad debts sold to the Vietnam Asset Management Company (VAMC) have been low, suggesting banks will continue to bear any potential recovery shortfall for these NPLs.

VAMC has bought bad loans worth 225 trillion VND (10 billion USD) at book value from 39 credit institutions since it became operational in October 2013. It has recouped some seven percent of the NPLs it has purchased.-VNA