RETAIL BANKING | Cesar Tordesillas, Vietnam

Vietnam may allow sale of ailing banks

Vietnam's central bank is paving the way for mergers and acquisitions among banks to step up the restructuring of the sector hit by rising bad debt.

After years of high credit growth, bad debt in Vietnam's banking system reached 3.04 percent of all loans at the end of July from 2.16 percent at the end of 2010, according to government statistics.

The central bank has said bad debt could rise to 5 percent of total loans by the end of 2011, but many economists and bankers say the true level of non-performing loans in the system is likely to be higher than the official figures.

The newspaper report did not give any bank names for possible mergers and acquisitions or any timeline for the central bank's plan.

At several banks, non-performing loans exceed the value of their equity, Sai Gon Tiep Thi quoted Le Xuan Nghia, deputy chairman of the National Financial Supervisory Council, as saying.

Officials at the central bank could not immediately be contacted for comment on the report.

Vietnam has more than 40 partly private banks, led by VietinBank and Vietcombank , as well as four fully state-owned banks, two of which are policy lenders.

Last month, Vietcombank said a unit of Mizuho Financial Group agreed to buy a 15 percent stake in it for 11.8 trillion dong or $567.3 million, in what could be the largest acquisition in the country's banking sector to date.

State-owned Agribank, the country's largest bank by assets, had bad debt that accounted for 6.67 percent of its outstanding loans at the end of August, said the ruling Communist Party's bureau that watches state-run businesses.

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