Vietnam asset management company establishment delayed

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Vietnam will delay establishing a debt asset management company until at least the end of April, as the government struggles to revive an economy hobbled by a slowdown in lending.

Prime Minister Nguyen Tan Dung asked the central bank and the ministries of finance and planning and investment to "quickly work together to make a better assessment of how much the company can help resolve bad debt between banks and businesses," Vu Duc Dam, chairman of the Government Office, told reporters yesterday. The company's formation will be delayed at least until next month's regular government meeting, he said.

Vietnam's 5 percent growth last year was the slowest since 1999, after rising levels of non-performing loans crimped credit and spurred calls for a revamp of the financial system. The monetary authority cut its policy interest rates this week to spur lending, following Dung's instruction to form a steering committee to restructure banks by 2015.

"That's not good news for the market," said Tu Vu, acting head of research at Viet Capital Securities in Ho Chi Minh City. "It's disappointing that we're getting another delay. This asset management company will have a big impact on market sentiment."

The Ho Chi Minh City Stock Exchange's benchmark VN Index climbed 0.1 percent yesterday to close near a six-week high before Dam's comments.

Last week, Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, said the debt asset management company would be formed before the end of March. The firm will issue bonds to finance the acquisition of debt from lenders, said Nghia, who did not provide a value.

Information trickle

Tu said details of the asset management company were trickling out this week and some investors were concerned it wouldn't be effective.

"They probably heard the feedback," he said. "That's probably why they're going back to the drawing board. It's best to work out any kinks before introducing it."

Vietnam's bank lending dropped 0.28 percent in the January- to-February period from the end of last year, according to a March 19 posting on the government's website.

The country's gross domestic product expanded 4.89 percent in the first three months of the year from the same period a year earlier, the General Statistics Office said March 27. That compares with a previously reported 5.44 percent pace in the last quarter of 2012 and a median estimate of 5.2 percent in a Bloomberg survey of 10 economists.

Asset quality

The World Bank said in December the health of Vietnam's lenders is a growing concern, citing their deteriorating asset quality and slow progress in restructuring.

The bad-debt ratio at Vietnam's banks dropped to 6 percent of total outstanding loans as of Feb. 28, from "about 8 percent" last year, Dam told reporters last month. The government last year said it aims to lower the ratio to below 3 percent by 2015.

Fitch Ratings said in October that it believes the ratio of non-performing loans is higher than 10 percent, and could worsen "given the downside risks." It estimates the cost of recapitalization of banks may reach 10 percent of the country's 2012 gross domestic product.

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