NPL settlement shows little progress

But, quarterly records show little progress. The unconsolidated financial statements for the third quarter of this year show that non-performing loan (NPL) growth rate has slowed since the first half of 2012 at some banks, but increased at others. For example, giant bank Vietcombank recorded a 3.2 per cent NPL ratio in the third quarter, down from 3.5 per cent in the second quarter. The bank’s irrevocable loan reduced from VND3,948 billion ($190 million) to VND3,211 billion ($154 million).

But the NPL ratio of Vietinbank, another giant bank, was 2.57 per cent in the third quarter, slightly up from the second quarter’s 2.5 per cent. But in the first half of this year only, the bank’s NPL ratio rised from 0.75 per cent to 2.5 per cent.

Higher ratios were also recorded at Asian Commercial Bank, rising to 2.06 per cent from 1.53 per cent, and at  LienVietPostBank, rising to 2.66 per cent from 2.43 per cent.

State Bank officers estimate that the overall ratio of NPLs in the banking system is between 8 percent and 10 percent. First half data show that the overall rate increased by 0.22 per cent during the second quarter, reaching 8.82 per cent.  System-wide data for the third quarter are not yet available.

On a positive note, State Bank Chief Inspector Nguyen Huu Nghia said  that the growth of NPL ratio is slowing. The most difficult time had passed, he said, and economic conditions were expected to improve.

“Credit institutions are having better loan loss provisons,” said Nghia.

Some banks’ NPL ratios have come down because of the reduction in inventories. According to General Statistics Office figures, the inventory growth rate has been decelerating from the beginning of this year. From July 1 to September 1, the rate slowed from 21 per cent to 20.4 per cent. “One solution to NPLs is dealing with inventories to have cash inflow to enterprises, then their loan repayment capacity is improved,” said Nghia.

Experts said that while waiting for remedies from the Government and State Bank to handle NPLs, the institutions must address the issues to protect profits and normal operations.

Tran Van Tan, head of credit office under the State Bank’s credit department, said that banks were working with each enterprise to ensure that they had capability and only had difficulties because of the gloomy market. “We require banks not to lower the credit safety requirement. But for old loans banks can reschedule the repayment for good enterprises, continue to lend those enterprises so they can do business and collect fund to repay banks.”

“The solution depends on each enterprise’s health. There is no one-size-fits-all solution,” Tan added.

Insiders said that banks also reduced costs by reducing salaries as well as bonuses for their employees, by terminating ineffective employees and by requiring debt collection personnel to strictly supervise collections of NPLs.