Banks being brought to account

Later last week the State Bank officially confirmed four poorly performing banks, including GP.Bank, Navibank, TrustBank and Western Bank, would be compelled to embrace restructuring before the year end.

State Bank  inspectors’ and independent auditing firms’ figures show that these banks’ bad debt rates came to several dozen per cent versus merely around 2 per cent as these banks had claimed.

According to a State Bank  representative, at this time these four banks have yet to present  optimal shake-up plans, but they still ought to climb into restructuring bandwagon in 2012.
Besides, the State Bank said it would submit to the government a plan on establishing national debt trading company on November 15, 2012. These steps aim to accelerate banks’ restructuring process.

The restructuring plans of Navibank and Western Bank are relatively clear at this time.

Accordingly, Navibank hosted its 2012 annual general shareholders meeting the earliest of the four banks. Its second quarter business statement shows that the bank’s bad debt rate was 3.14 per cent as of June 30, 2012 and its after-tax profits in 2012’s first half fell slightly on-year to VND91.5 billion ($4.3 million).

“Navibank will leverage its inner strength, particularly using its undistributed profits, to restructure, boost collateral value and strengthen financial capacity,” said Dang Thanh Tam, a board of directors member.

The State Bank reportedly green-lighted the bank’s commitment for self-restructuring using inner resources and Navibank would not need to merge with other banks.

As with Western Bank, its 2011 audited consolidated financial statement shows that the bank credit expanded 123.5 per cent in 2011 versus modest return-on-equity rate of 4.84 per cent.

Besides, since the bank has set aside a huge loan amount to lend its shareholders and associated companies, its business is assumingly risky.  

Western Bank’s shake-up plan would be tabled in the bank’s 2012 annual general shareholder meeting slated to take place in November or December 2012.

Industry insiders assumed it was almost certain Western Bank would be merged into Petroleum Finance Joint Stock Corporation (PVFC).

Meanwhile, information available for GP.Bank and Trustbank is scarce. After seven years in existence, GP.Bank still remains miniscule on scale. With Trustbank, its 2011 audited consolidated financial statement shows that the bank’s after-tax profits was approximately VND164 billion ($7.8 million) against VND300 billion ($14.3 million) pre-tax profits in 2010 and bad debts came to around VND200 billion ($9.5 million).

Industry insiders assumed it was almost no possibility for GP.Bank and Trustbank to self restructure but they might be compelled to merge into other banks.