High Bad Debts Hit Finance Leasing Firms In Vietnam

Source: vaytinchap.org

The total assets of finance leasing firms reached VND19.2 trillion with negative equity of VND2.1 trillion and the capital adequacy ratio (CAR) at minus 10.92% by that time, Tuan said in a report.

Meanwhile, financial companies had total equity of VND21.3 trillion, total assets of VND156.6 trillion, CAR of 15.98% and bad debt ratio of over 2%.

There are currently 18 finance companies and 12 finance leasing companies operating in Vietnam.

Preliminary statistics show that three finance companies had smaller revenues than expenditures in the first 10 months of last year, while two finance leasing firms violated the minimum CAR regulation.

“Finance companies and finance leasing firms have witnessed their credit market share shrink to 3.35% (by end-June 2011) due to inefficient businesses and huge losses,” Tuan said.

Meanwhile, by last June, the credit market share of State-owned commercial banks fell from 58.15% in 2008 to 49.09%, while commercial joint-stock banks saw their share increase from 26.52% to 37.78%.

Credit institutions as well as their branches and transaction offices have been expanding strongly in the past 10 years, bringing the total number of credit institutions nationwide to 130 with over 9,600 branches and transaction offices as of the end of last June.

Given the harsh competition for market share with the strong rise of commercial joint-stock banks, the capital mobilization market share of finance companies and finance leasing firms declined from 3.64% in 2008 to 0.87% last year.

Commercial joint-stock banks jumped from the second place in 2010 to the leading position last year, holding 47.7% of the system’s capital mobilization market share.

On the other hand, State-owned commercial banks saw their share drop by 5.21% against 2010, accounting for 43.86% of the entire system’s market share as of last June compared to 56.88% at the end of 2008.

According to the report, a tense liquidity situation was also occurring at several credit institutions due to rising bad debts, insufficient provision for risks, declining asset quality and out-of-control credit risks.

Some credit institutions faced high client-related risks because of poor management and violations of corporate governance and risk management.

(Source: Thoi Bao Kinh Te Saigon)