Banks will need more provisional funds to support the risk of non-performing loans (NPLs) in accordance with national requirements for controlling bad debts, reported Dau tu (Vietnam Investment Review) online.

Asia Commercial Bank General Director Do Minh Toan said his bank targeted credit growth of 13-15 percent and a bad debt ratio of below 3 percent this year and had arranged a provisional fund of some 2 trillion VND (95.24 million USD) for 2015.

This year, the bank planned to sell 1 trillion VND (47.62 million USD) of NPLs to the Vietnam Asset Management Company (VAMC) and handle 1.6 trillion VND (76.19 million USD) in bad debts by itself, he added.

Sai Gon Joint Stock Commercial Bank reported that it had sold 11.4 trillion VND (542.86 million USD) in NPLs to the VAMC over the last three years, reducing its bad loan ratio to 0.5 percent by the end of last year.

The bank said it would have to continue to deal with NPLs to improve its financial situation, and provisional funds were likely to be increased.

Vietnam International Bank also said it would establish a provisional fund of more than 2 trillion VND (95.24 million USD), though it had held its bad debt ratio at 2.51 percent in 2014.

The bank expected its deposits to grow by 8 percent to 53 trillion VND (2.52 billion USD) and outstanding loans to increase by 11 percent to 42.38 trillion VND (2.02 billion USD) this year.

It planned to resolve some 3.84 trillion VND (182.86 million USD) in NPLs, predicting provisional funds would rise sharply, with bad debts likely to climb by 300 billion VND (14.28 million USD) in 2015.

Eximbank leaders said establishing provisional funds was a prerequisite for guaranteeing operational security; hence, it was willing to sacrifice profits to provisions. In 2014, a provisional fund amounting to 3 trillion VND (142.86 million USD) resulted in a pre-tax profit as low as 68 billion VND (3.24 million USD) for the bank.

The bank planned to sell some 1 trillion VND worth of bad debts to the VAMC this year, they added.

The State Bank of Vietnam (SBV) has urged credit institutions to step up bad debt resolution since January in a bid to reduce the overall NPL ratio in the domestic banking system to less than 3 percent in 2015, following Government orders.

The lenders have to resolve by June 30 at least 60 percent of the total number of bad loans they are supposed to handle in 2015. They have to transfer at least 75 percent of the total debts they will register for sale to VAMC this year, within the same deadline. The deadline for selling all their NPLs is September 30.

The SBV has allowed the VAMC to issue special bonds, worth up to 80 trillion VND (3.76 billion USD), to acquire bad loans from credit institutions this year. The central bank also required lenders to establish yearly provisional funds amounting to 20 percent of the value of the bonds they had bought from the company.

Tran Du Lich, a member of the National Financial and Monetary Policy Advisory Council, said selling NPLs to the VAMC was a good way for banks to clean up their accounting balances, but the requirement for provisions would create significant pressure for them.-VNA