Vietnam aims first debt sale of bank cleanup as growth slows

Bloomberg

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Vietnam’s state asset management company aims to start selling bad debt from banks in the third quarter, stepping up efforts to overhaul lenders and spur economic growth.
The asset manager, known as VAMC, was set up last July to acquire non-performing loans and enable banks to lend again. It has bought about 45 trillion dong ($2.1 billion) of bad debt and plans to purchase about 15 trillion dong more between now and the end of June, Vice Chairman Nguyen Quoc Hung said in a telephone interview in Hanoi yesterday.
“We expect the first debt to be sold in the near future, hopefully next quarter,” Hung said, adding that he can’t disclose the amount as the debt is being evaluated and classified. “We’ll make a list of categorized debt assets and put them up for sale once we complete the assessment process,” he said, adding that the first buyers are likely to be local.
Vietnam’s policy makers are trying to bolster an economy that the World Bank estimates will expand 5.4 percent this year, a seventh straight year below 7 percent. While the central bank has cut its policy interest rates, the push to rejuvenate credit growth has faced challenges including enticing foreign buyers to acquire bad debt, according to Hung.
“The VAMC will have no chance of selling bad debt anywhere near the book value,” said John Sheehan, Bangkok-based managing director for Southeast Asia for Japanese loan and asset servicing and collection company Capital Services Group. “We’d be very keen to participate if there were going to be an open market sale of non-performing loans in Vietnam with some kind of transparent bid process.”
Long awaited
Seven of Vietnam’s nine listed banks rose at the close today, led by Saigon-Hanoi Commercial Joint Stock Bank which surged 5.3 percent. Military Commercial Joint Stock Bank rose 3.6 percent, while Vietnam Joint Stock Commercial Bank for Industry and Trade added 2.6 percent, the most since Oct. 7 last year. That compared to the 2.1 percent gain for the benchmark VN Index. The dong was steady at 21,098 against the U.S. dollar at 4:35 p.m. local time.
“It’s quite positive for the market in general, and for bank shares in particular,” said Phan Dung Khanh, investment consultant manager at Maybank Kim Eng Securities Co. in Ho Chi Minh City. “VAMC’s debt sales have been long awaited, and this shows they are really moving ahead. However, how much debt, and the prices at which it is sold are very important.”
Moody’s Investors Service estimated bad loans at Vietnam’s banks made up at least 15 percent of total lending in a February note. The central bank disputed the assessment, saying NPLs had dropped to 3.63 percent at the end of 2013. Soured loans and restructured debt totaled about 9 percent of system-wide loans as of end-2013, the central bank said Feb. 22.
Resume operations
“Our job is not just to trade debt, but also to help businesses as the government aims to quicken economic growth,” Hung said. VAMC can provide guarantees to companies which are struggling to repay earlier loans, to enable them to borrow again “to help them resume operations so that they can stay in business and be able to pay back the debt later.”
Prime Minister Nguyen Tan Dung earlier this month repeated a request to the central bank to step up measures to lower lending rates and help companies, as the highest level of bad debt among Southeast Asia’s biggest economies curbed credit growth and hurt businesses.
“We are pushing ahead with detailed proposals to the central bank to complete the necessary changes in the legal framework to facilitate the formation of a debt market,” Hung said. “What we’re trying to do here is not only help banks to clean up bad debt, but also companies to revive businesses and spur the economy.”
VAMC has received inquiries from foreign investors with an interest in the bad debt it has bought, “but most of them just wanted to be the middlemen,” Hung said, without disclosing any names. “If there is anyone who really wants to spend money to buy debt or any collateral we have, we’ll be willing to discuss and facilitate to make the purchase happen.”

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