Vietnam’s finance and banking sector has reduced its ratio of non-performing loans to 6.7 percent at the end of June 2018 (Photo: VietinBank) Hanoi (VNS/VNA) – Vietnam’s finance and bankingsector has reduced its ratio of non-performing loans (NPLs) – including bothNPLs owned by credit institutions and the Vietnam Asset Management Company –from 17.2 percent in 2012 to 6.7 percent at the end of June 2018.
The assessment was made by analysts at the Bank forInvestment and Development of Vietnam (BIDV)’s Research Centre.
According to analysts, the achievement was partly thanks tomore reasonable credit growth. Annual credit growth rate in the 2011-17 periodwas 14.3 percent, much lower than the 34 percent rate recorded from 2006-10.
Liquidity at banks has been also stable in the past fiveyears, with the loan-to-deposit ratio (LDR) declining from 98 percent at the endof 2011 to 87 percent at the end of 2017, while lending interest rates havegradually fallen and averaged 9.8 percent from 2011-17, down from 12.3 percentfrom 2006-10.
According to BIDV’s report, risk management capacity atcommercial banks had improved significantly and banks were expected to meetBasel II standards by 2020 as part of the central bank’s plan. Basel II, whichcomprises minimum capital requirements, supervisory review and marketdiscipline, aims to enhance competition and transparency in the banking systemand make banks more resistant to market changes.
Most commercial banks are planning to apply Basel IIstandards, and some have completed the implementation of Basel II’s riskmanagement system and a few have started to apply all Basel II standards.
Confidence in domestic banks had also improved significantly,according to BIDV’s report, noting that international ratings agencies such asFitch and Moody’s had upgraded the ratings for 12 Vietnamese banks in May andAugust this year.
Profitability among banks, securities and insurance companieshad also risen with return on assets (ROA) and return on equity (ROE)increasing sharply in recent years.
At the same time, domestic financial institutions have alsobecome more transparent with 23 of 35 banks being audited by internationalauditing firms. Sixteen banks, 26 of 85 securities companies and 10 of 50insurance companies have so far also listed on the domestic stock exchanges,the report noted.-VNS/VNA
VNA
