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Moody's remains unmoved over VN banking outlook

Update: February, 20/2014 - 09:08
Viet Nam has one of Asia's highest ratios of NPLs, which has troubled the economy and led to a tightening of the credit policy required to boost consumer spending and keep businesses afloat.— Photo dddn

HA NOI (VNS) — Moody's Investors Services maintained its negative outlook on Viet Nam's banking system, where the problem assets ratio comprises at least 15 per cent of total assets.

Moody's assessment is five times higher than the bad debt ratio of 3.79 per cent at the end of 2013, announced by the State Bank of Viet Nam on January 21.

"Regarding the big gap between the two rates, I believe the methods applied to calculate these valuations are different," said Le Hai Tra, member of the HCM City Stock Exchange's board of directors.

"It sounds like two photographers are photographing a scene with two different cameras and under different light conditions," Tra added.

Similar to Moody's report that rated nine banks, two state-controlled banks and seven joint-stock banks, S&P's report released last week also warned about weak asset quality, stagnant profitability and weak capitalisation in Viet Nam's banking system.

In an announcement released on Tuesday, Moody's recognised recent signs of stabilisation in the macro-economy and regulatory measures. However, the rating agency did not expect a significant broad-based improvement in the capitalisation of Viet Nam's banks in the next 12-18 months.

"Capital remains inadequate for absorbing the extent of potential losses stemming from pervasive weaknesses in asset quality," said Gene Fang, Moody's vice president and senior analyst.

Regarding handling of non-performing loans (NPLs), S&P expected the Viet Nam Asset Management Company (VAMC) in 2014 to handle 2-4 per cent of bank loans from 1 per cent at the end of 2013. However, Moody's said recent policies such as those proposed by VAMC have not directly addressed under-capitalisation in the banking system.

The government aims to bring the bad debt ratio to 3-4 per cent of total lending by the end of 2015. This year, VAMC plans to buy VND70-100 trillion (US$3.33-4.76 billion) NPLs through special bonds. However, there will be pressure to sell and handle the bought debts in 2014. Therefore, VAMC is preparing a plan for debt trading at market prices.

Viet Nam has one of Asia's highest ratios of NPLs, which has troubled the economy and led to a tightening of the credit policy required to boost consumer spending and keep businesses afloat.

According to S&P, Viet Nam's GDP growth in 2014 may reach 5.5 per cent from the 5.4 per cent of 2013. Viet Nam has remained relatively insulated from the sell-off in emerging markets.— VNS

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