The ratio of bad debts at a number of credit institutions in HCMC in 2011 was still high, or even sharply rose compared to the previous year, said the central bank’s HCMC Branch.

The branch unveiled the above information in a review report on last year’s performance and this year’s operation orientation.

As per the report, the fifth-group debts – seen as the worst non-performing loans – accounted for a high portion of overall bad debts among the local lenders.

A large part of the bad debts was from loans given to the property sector. A local bank even reported the value of realty loans shot up to 70% of its total outstanding loans as of the end of last year.

Another report by the branch showed that Vietnam Bank for Agriculture and Rural Development, or Agribank, has the highest ratio of bad debts, at over 15% out of the four state-owned commercial banks.

Meanwhile, the average ratio of non-performing loans of commercial joint stock banks in the city was 2.59%.

In contrast, commercial joint stock banks whose headquarters are located outside HCMC posted the figure at more than 26%. Also, finance companies in the city suffered a 16.97% ratio for the non-performing loans while that of finance leasing ones was 23.31% as of end-November in 2011.

However, people credit funds at the end of November last year had only a ratio of bad debts at 5.46%.

The city’s credit institutions reported their total bad debts in the primary market servicing residents and organizations at 3.85% at the end of last year’s November. The statistics by the HCMC Branch pointed out that most banks enjoying low profits or mired in losses or high bad debt rates are due to having been involved in real estate-related loans.

The central bank affirmed that credit activities of the banking system this year will continue facing unexpected risks as uncertainties of the property market and local enterprises remain unpredictable. Therefore, the branch urged local banks to closely supervise bad debts and give out appropriate solutions.

Also, the branch requested its members to handle and minimize arising bad debts as well as ensuring the bad debt ratio at the level of less than 5% to the total outstanding balances.

In addition to credit risks caused by rising bad debts, the branch proposed credit institutions strictly manage term risks. “It is very difficult to adjust the structure of short-term deposits in sync with long-term loans and thus the capital usage at small commercial lenders has been burdened with heavy pressure for fear of term risks,” the branch explained in its report.

Recent statistics from the branch revealed that total debts relating to non-productive sectors including consumer credits, real estate loans and loans for securities as of September 30 last year made up 18.57% over total outstanding balances, down 0.03% from the beginning of the same year.

The total mobilized deposits in the city as of December 31 last year reached VND888.9 trillion, up 10% year-on-year while the credit growth at the year’s end was estimated at 6.3% against 2010.

The Saigon Times Daily