Banks in Vietnam had weaker 2011 results, face rising debts: central bank

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A customer at Joint-Stock Commercial Bank for Foreign Trade of Vietnam, or Vietcombank, counts dong bank notes prior to making a deposit in Hanoi

Banks in Vietnam had weaker financial performance in 2011 than the year before and their bad debts recently have been "rising continuously," the central bank said in a report on Wednesday.

The State Bank of Vietnam said the country's banks last year had slower profit growth as well as reduced rates of return on equity and return on assets.

The government adopted tight fiscal and monetary policies in 2011 to help control inflation, which affected the performance of banks and businesses, with many enterprises facing bankruptcy, the central bank said.

The report comes at a time of concern about some Vietnamese banks, given the tight policies and slowed economic growth. The government has started restructuring the financial system and seeking to get some banks to merge, but analysts say its steps have been behind schedule.

Half of all lenders recorded lower profit last year and 10 percent of them faced losses, the central bank report said without naming any banks or giving figures for the their earnings results.

The report said that overall profit growth of banks slowed in 2011 to 15.1 percent, but it didn't give any comparable figure for 2010.

The return on equity (ROE) of Vietnam's banking system was 11.86 percent last year compared with 14.56 percent in 2010, and the 2011 return on assets (ROA) dropped to 1.09 percent from 1.29 percent the previous year, according to the report said.

Banks in Southeast Asia have their ROE of 14-15 percent, it said.

Worry on bad debts

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The central bank report didn't comment on the outlook for banks in 2012. But it expressed concern about bad debts.

"The absolute value and bad debt ratio of banks have been rising continuously, especially in the last months of 2011 and early in 2012," the report said, citing bank inspectors.

Bad debts in Vietnam hit $5.18 billion, or 4.14 percent of total loans as of April, up from 3.06 percent in 2011, due to economic difficulties faced by businesses, state-run media on Tuesday cited a central bank report as saying.

Earlier this month, governor Nguyen Van Binh told the National Assembly the system's bad debt had risen to 10 percent of loans from 6 percent earlier, but he gave no specific timeframe.

Last year, Vietnam's economic growth slowed to 5.89 percent from 6.78 percent in 2010.

Vietnam's economic growth is forecast to slow to an annual pace of 4.31 percent in the first half of this year, Deputy Prime Minister Nguyen Xuan Phuc said last Friday.

Nearly 50 banks operate in Vietnam, including three fully state-owned lenders, 39 partly private banks and five fully foreign-owned banks.

The banking system also has 54 foreign bank branches, four joint venture banks, 17 financial firms, 12 financial leasing companies and nearly 1,100 credit funds, central bank data show.

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