Vietcombank, the largest lender by market value, on Wednesday dropped to the lowest in more than four months, pacing a decline in Vietnamese financial stocks after the government said bad debts are mounting at the nation's banks.
Vietcombank dropped 1.4 percent to VND27,500 at the 11:30 a.m. local-time break, heading for the lowest close since March 16. Hanoi Building Commercial Joint-Stock Bank lost 2.2 percent to VND4,500, bound for a three-week low.
Vietnam Joint-Stock Commercial Bank for Industry and Trade, the second-largest lender by value, fell 0.5 percent to VND20,700, while Military Commercial Joint-Stock Bank lost 0.7 percent to VND13,900. The benchmark VN Index declined 0.7 percent to 411.75, heading for the lowest close since July 12.
Bad debt in the Vietnamese banking system remains on an "uptrend," Vu Duc Dam, chairman of the Government Office, said at a press conference late Tuesday. Bad debts rose to 4.47 percent of total lending as of May 31, from 3.07 percent at the end of 2011, according to the country's central bank.
"Even though investors were aware of the problem, the reiteration by the government has increased concern over the outlook for bank profits," said Nguyen Thi Lan Huong, Ho Chi Minh City-based analyst at ACB Securities Joint-Stock Co.
The State Bank of Vietnam is drafting measures to curb bad debts, Nguyen Thi Hong, the central bank's head of monetary policy, said at the same press conference Tuesday. The monetary authority needs to "quickly restructure banks' debt, reduce bad debt and restructure weak lenders" to minimize risks to the banking system, according to an order posted on the government website Tuesday.
"The high bad-debt ratio is a worrying problem," Nguyen Duc Hai, Ho Chi Minh City-based portfolio manager at Manulife Asset Management, said by phone on July 30. "It's become a large burden on banks and hindered them from increasing loans."