Maintenance is regulators' top priority.
Vietnam's largest banks grew rapidly in the past four years in a booming economy, with loans and deposits ballooning, making the maintenance of asset quality a top priority for regulators.
According to a research note from SN Financial, loans at three of the four largest Vietnamese banks — Vietnam Joint Stock Commercial Bank for Industry & Trade, or Vietinbank; Joint Stock Commercial Bank for Investment & Development of Vietnam, or BIDV; and Joint Stock Commercial Bank for Foreign Trade of Vietnam, or Vietcombank — grew by at least 80% between 2010 and 2014.
Meanwhile, aggregate deposits at these three banks almost doubled to 1.2883 quadrillion Vietnamese dong over the same period.
Profits have also increased; the combined profits of the three banks totaled 15.329 trillion dong in 2014, compared to 10.733 trillion dong in 2010.
The country's largest bank by assets, Vietnam Bank for Agriculture & Rural Development, or Agribank, has not yet released 2014 full-year data, but its total loans increased by 24.7% between 2010 and 2013. However, its net income more than halved over the same period.
Here's more from SNL Financial:
Among the three largest banks that have reported full-year 2014 results, Vietinbank had the lowest nonperforming loan ratio at 1.12%, the highest ROAA at 0.96% and the highest net interest margin at 3.06%.
In total, there are 10 Vietnamese banks with more than 150 trillion dong in assets. Five of these companies had NPL ratios that were above 2% of total loans as of the end of 2014, with the NPL ratio of Hanoi-based Military Commercial Joint Stock Bank, or Military Bank, being the highest at 2.85%.
State Bank of Vietnam Governor Nguyen Van Binh reportedly said in September 2014 that the country's banking system held an estimated 500 trillion dong in bad debt.
The Vietnamese government has set a goal of reducing the industry's NPLs to less than 3% by the end of 2015 by enhancing the financial strength, capacity and role of the Vietnam Asset Management Co., which was set up in 2013 to purchase bad debt from local banks.
The asset management company expects to purchase up to 100 trillion dong in bad debt in 2015. The government also looks to strengthen the implementation of laws and regulations on debt classification and risk provisioning.
In addition, regulators are urging 26 unlisted commercial banks to go public to ensure greater transparency in their operations. The central bank has also said that it will push weaker banks into bankruptcy if they cannot be salvaged.
Vietnam's three largest public banks have underperformed regional peers over the last five years ended Feb. 24. The SNL Asia-Pacific Bank Index returned 50% over this period, while Vietcombank returned 36%, BIDV only 4%, and Vietinbank saw a loss of 5%.
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