Vietnam's bank SHB reports losses after takeover of troubled lender

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A branch of Saigon-Hanoi Commercial Joint Stock Bank

Hanoi-based lender SHB has reported a sizable loss after taking over Habubank in August, saying the acquisition forced it to deal with a large amount of low quality loans that require huge provisions.

SHB, formally known as Saigon-Hanoi Commercial Joint Stock Bank, posted cumulative losses of VND1.1 trillion (US$53.4 million) at the end of September, compared to a profit of VND600 billion three months earlier, according to news website VnExpress.

The bank said it had to incur losses of VND1.7 trillion from Habubank as a result of the takeover.

"We had to assess and categorize all the loans at Habubank again and set aside risk provisions for them in accordance with banking regulations," VnExpress cited an unnamed executive as saying. Total provisions reached VND2.1 trillion at the end of September, the report said.

Troubled lender Habubank, or Hanoi Building Commercial Joint-Stock Bank, had bad debts of VND3.73 trillion ($179 million), or 23.7 percent of its loans, before the acquisition. Central bank officials said the lender had invested in risky sectors with flawed risk management practices.

Despite the issues, SHB decided to pursue a buyout in an attempt to strengthen its presence in the market rapidly at a "reasonable" cost. Do Quang Hien, SHB Chairman, said the deal would allow the bank to complete a five year expansion plan in just seven months.

Total assets at the bank increased 27 percent to VND103.7 trillion within the third quarter while its number of employees rose 63 percent and its number of branches nearly doubled.

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

Moody's in July assigned B2 deposit and issuer ratings for SHB and revised the outlook to negative. The ratings agency said there was downward pressure on the credit quality of the merged entity compared to SHB's relatively healthy pre-merger profile.

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