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Bank learn to look after number one
Banks are scaling up efforts to address credit quality and drive down bad debt rates.
Firms’ dismal production and business results in 2012, which could undermine their debt repayment capacity, is banks’ biggest concern.
An ACB representative said the bank had exerted energy into analysing the root of the problem and rendered warnings about bad debt threats.
This year, ACB will focus on promoting lending in retail and medium-sized enterprises and individual customer groups. Besides, the bank will foster credit sources’ risk management aiming at minimising bad debt rates. Particularly, it will strive to keep the debt rate of group 3 to 5 loans at less than 1 per cent and that group 2 at 2 per cent of total outstanding loans, according to ACB.
In 2011, Vietcombank’s bad debt rate was kept at 2.03 per cent, lower than 2.3 per cent projected which was approved by the annual shareholder meeting.
This year, Vietcombank set to retain bad debts of less than 2.8 per cent and step up efforts to boost debt recovering efficiency.
“In 2012, our bank will tightly control medium and long-term credit and growth in foreign currency reserve as well as keep close eyes on central bank’s management policies and the system’s liquidity to be able to draw suitable policies aimed at restricting bad debts,” said Vietcombank general director Nguyen Phuoc Thanh.
As with DongA Bank, the bank saw VND742 billion ($35.3 million) in bad debts (from group 3 to group 5 loans) in 2011, tantamount to 1.69 per cent of its total outstanding loan, but it was still higher than 1.4 per cent in 2010. The bank also contributed VND296 billion ($14.1 million) for loan loss provision, said general director Tran Phuong Binh.
This year, Dong A Bank will strive to keep bad debts of 1.5 per cent of total outstanding loans and set aside 2-3 per cent of its assigned 15 per cent credit growth in 2012 to make provisions.
In 2012, the State Bank continues its tightening credit policies to tame inflation and ensure macroeconomic stability. Ceiling credit growth targets were set at 17, 15, 8 and zero per cent depending on bank health. Lending to non-priority areas was kept at less than 16 per cent of total outstanding loans. However, according to HSBC Vietnam, banks could hardly surpass those set credit growth targets on the back of current very low market demands
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