The National Financial Supervisory Commission reported that the economy is slowly recovery thanks to the growing stability of the banking system.
A report issued Thursday said Vietnam's banks are more stable now than they were in 2013 as total assets have increased by 15 percent, partly thanks to rising deposits.
Truong Van Phuoc, vice chairman of the commission, said total assets had risen by about 22 percent in previous years.
“But I think one percent in recent years is much bigger than one percent years ago, as the banking scale has increased,” Phuoc said.
He said the overall structural integrity of the system has seen positive changes as inter-bank loans have fallen from 23 percent in 2011 to 17 percent in 2013
The report said cash holdings in the banking system have increased over the past couple years. Deposits in 2013 rose by 23.6 percent despite a 2 percentage point drop in the deposit interest rate, while credit growth hit 12.5 percent.
The loan to deposit ratio has fallen from 98 percent in 2011 to 85.4 percent last year, which Phuoc described as a safe development.
Many banks once lent far more than their deposit holdings.
The report cited bank managers as saying that their overdue and bad debt rates have started to recede.
Overdue loans in 2013 fell to 8.8 percent of total holdings from 11.3 percent the previous year; during the same period, the percentage of bad debt fell to 3.6 percent from 4.2 percent.
The Central Bank established the Vietnam Asset Management Company last July to buy bad bank debt and it has already scooped up VND40 trillion (US$1.9 billion) in troubled loans. Another VND66 trillion has been dealt with by issuing bonds.
But, as the economy stagnates, Phuoc said that bank profits have plunged, with the return on equity rate down from 15 percent in 2009 to 6 percent in 2013.
“Many banks are hovering around 1 percent.”
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