Habubank engaged in risky lending, official says after takeover

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Troubled lender Hanoi Building Commercial Joint-Stock Bank, which is being taken over by SHB, had exposed itself to major risks by lending to vulnerable companies between 2008 to 2010, a central bank official said.

Habubank, as the bank is popularly known, had also invested in risky sectors and its risk management practices were flawed, said Nguyen Huu Nghia, interim chief inspector of the central bank, without elaborating.

"If we (inspectors) had not watched the bank closely, we wouldn't have detected the problems and put it in the priority group of lenders that need to be restructured first," Nghia was quoted as saying at a press conference by news website VnEconomy last week.

Vietnam's central bank gave approval for SHB to take over Habubank last week, the second M&A deal in the banking sector in less than a year. The voluntary takeover is expected to be completed next month.

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SHB's bad debt will stand at 8.69 percent of loans after the deal. The bad debts of Habubank amounted to VND3.73 trillion (US$179 million), or 23.7 percent of its loans, Chief Executive Nguyen Van Le of Hanoi-based SHB, formally known as Saigon-Hanoi Commercial Joint Stock Bank, was quoted by local media as saying.

Do Quang Hien, SHB Chairman, said Habubank's high bad debt ratio will be reduced to 10 percent by the end of the year. 

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