The banking sector has cleaned up VND85 trillion (US$4.02 billion) worth bad debts since the end of last year, bringing the ratio down to 4.68 percent as of June, the State Bank of Vietnam governor Nguyen Van Binh said.
But it was higher than the 4.46 percent targeted by the central bank earlier.
Binh said the bad debt figure had been more than 8 percent at the end of last year.
The industry is still waiting for the newly established Vietnam Asset Management Company (VAMC) to begin buying its bad debts.
The central bank has set a bad-debt cap of 3 percent for banks and requires them to sell off the rest to the VAMC.
Binh had said earlier that the state-owned entity, incorporated in July, planned to buy VND30 trillion worth bad debts this year.
But analysts are skeptical about the VAMC’s ability to make a dent on one of the highest levels of bad debt in Southeast Asia given the lack of transparency in estimates of non-performing loans.
At the end of last year banks had reported bad debts to be at just half the level estimated by the governor then. International agencies like Fitch Ratings put the figure at double digits, much higher than the banks’ estimates.
Nguyen Hoang Minh, deputy director of the central bank’s Ho Chi Minh City branch, was quoted by news website Saigon Times as saying that so far two banks — Navibank, whose bad debt ratio is 6.1 percent, and ACB, 2.99 percent — have announced plans to sell non-performing loans to the VAMC.
But the VAMC is still awaiting government guidance on buying debts, he said.
In the first half of this year lending rose a mere 4.5 percent, the slowest pace in a decade.
Economist Nguyen Tri Hieu fears a majority of banks will make losses this year even if they manage to meet the 12 percent target for credit growth since they have to make more provisions for bad debts.
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