Banks race to offload expensive property as bad debt buyback looms

By Minh Son   May 6, 2019 | 09:00 am GMT+7
Banks race to offload expensive property as bad debt buyback looms
VPBank needs to set aside $136.65 million in reserves for bad debt. Photo by VnExpress/Thanh Thu

Many banks are looking to sell mortgaged assets as they prepare to buy back bad debt from the state.  

The asset management company of VPBank (VPBank AMC) has this week updated its list of assets to be auctioned to include many cars and land lots in Hanoi, and the northern provinces of Thai Binh and Thai Nguyen.

While most cars listed are four-seaters ranging from VND190-500 million ($8,220-21,620) in value, there were also new Audi cars with a starting price of VND1.15 billion ($49,730).

Real estate put up for sale in Thai Binh and Thai Nguyen provinces has a starting price of around VND300 million to over VND1 billion ($12,970 - $43,240), while some properties in central Hanoi will be auctioned off at a starting price of over VND2.5 billion ($108,110).

However, for many real estate projects of high value or priced higher than market value, the bank will have to go through the auction process many times to find buyers. The latest list of properties for sale by VPBank AMC includes properties that have been unsuccessfully auctioned 5 or 6 times.

"For projects that fail to sell, banks have simply not found a ‘bargain’ price buyers are willing to pay," Nguyen Tri Hieu, a banking expert, told local press.

Similarly, VietinBank, one of Vietnam’s three biggest state-owned lenders, has also announced the auction of mega-assets, including a steel ship capable of fishing far from shore, as well as a high-rise project worth VND76 billion ($1.77 million), for the eighth time.

State-owned Agribank has also been auctioning collateral assets continuously in the past quarter. The assets include two rows of houses in the downtown of Ho Chi Minh City for VND69 billion ($2.98 million).

The private Sacombank, meanwhile, is selling several houses in HCMC as well as 37 land deeds in the southern province of Vinh Long.

Bad debt pressures

According to a report by securities corporation SSI, VPBank's consolidated non-performing loans (NPL) ratio increased in 2018 to 3.21 percent from 2.89 percent in 2017.

VPBank has also been planning to buy back all of the bad debt it sold to the state-owned Vietnam Asset Management Corp (VAMC) in 2013, totalling VND3.16 trillion ($136.65 million).

Because the bank will have to sacrifice a portion of profits to set up bad debt reserves, it is trying to resolve as much of its overdue debts as soon as possible by liquidating assets put up as collateral.

VAMC, run by the central bank, has bought a total of VND282 trillion ($12.4 billion) worth of bad debt to rescue 42 banks from either bankruptcy or net losses back in 2013, as five-year bonds. Once the bonds mature, the banks will have to buy back any bad debt VAMC has failed to recover.

Vietinbank’s NPL ratio had also risen from 1.13 percent in 2017 to 1.58 percent at the end of 2018, and the bank has VND13.43 trillion ($580.75 million) worth of debt it has to buy back from VAMC. It has only been able to set aside VND2.23 trillion for its bad debt reserves.

As of April, Sacombank had the highest amount of debt bought by VAMC, at VND40.23 trillion ($1.74 billion.  

Agribank management has said that it has established reserves worth VND20 trillion ($864.86 million), enough to buy back all its bad debt at VAMC, after which the bank will go for an IPO in 2020.

Vietnam had stepping up efforts to reduce the ratio of non-performing loans after years of loose lending and fast credit growth leading to a bad debt ratio of 6.3 percent in the banking system as of December 2018, according to the State Bank of Vietnam.

However, the ratio is much lower than 10.08 percent at the end of 2016 and 8.61 percent as of September 2017, SBV Governor Le Minh Hung said at a meeting in January.  

 
 
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