Non-performing loans (NPLs) accounted for 5.99 percent of the total loans of Ho Chi Minh City-based banks in the first nine months of this year, said Nguyen Hoang Minh, deputy director of the State Bank of Vietnam's Ho Chi Minh City branch.

During a meeting between representatives of Ho Chi Minh City-based banks and the local National Assembly delegation on October 14, he said that borrowers of the bad debt were mainly real estate firms, consumer firms and small- and medium-sized firms.

Finance leasing companies had the highest bad debt ratios among credit institutions with bad debts accounting for more than 44 per cent of their total outstanding loans in the first nine months – seven times the ratio of the city's whole finance-banking industry.

Foreign banks had the lowest NPL ratio of 2.93 percent, according to the official.

However, experts said that the public should not be concerned about the sky-high bad debt ratios of financial leasing companies, as their assets only accounted for about 4 percent of the total assets of all credit institutions.

The main clients of these companies are enterprises that need specific equipment, such as that used in construction, textile and garment production and shipbuilding.

A senior executive of Vietcombank's finance leasing company, who declined to be named, said the current legal framework had only loose asset leasing provisions, meaning risk for the companies was high.

Banks in the southern hub are expected to sell as much as 6 trillion VND (272.72 million USD) worth of bad debts to the Vietnam Asset Management Company (VAMC) before the end of the year.

Besides SCB and Southern Bank, which sold 1.3 trillion VND (59.09 million USD) of bad debts to VAMC late last week, other lenders including Vietcombank and Navibank also plan to ease their bad debt burden by selling NPLs to the debt trading firm.

In the first half of this year, 14 commercial banks in the city set aside 2.3 trillion VND (104.54 million USD) in provision for loan losses and used the provision to tackle nearly 1 trillion VND (45.45 million USD) of bad loans.-VNA