Vietnam banks' NPL ratio reaches 9%

The 2.4% NPL ratio reported at end-2015 was understated.

Fitch believes the large NPL stock will take time to be resolved due to various legal impediments.

The ratings agency adds that the 2.4% weighted-average reported NPL ratio at end-2015, based on the nine-largest banks, understates the actual asset-quality issues. The ratio works out at 9%, after adding NPLs sold to Vietnam Asset Management Company (VAMC) and ‘special mention’ loans.

"Loan diversification away from lending to the inefficiently run SOEs towards small-ticket retail loans may help mitigate the asset-quality pressure. Notably, lending to SOEs had declined to 15% (of total loans of the eight-largest banks in Vietnam) by end-2015 from 19% at end-2011, while retail exposure had increased to 36% from 27%," adds Fitch.