Bankers say bad-debt ratio is not that high While economists doubt commercial banks can reduce the bad-debt ratio to below 3 percent by the end of August, bankers said the target was within reach because the current situation is not as bad as once thought.    The bad debt ratio of some commercial banks, including the better ones, has increased again. VietinBank, for example, reported that non-performing loans (NPL) increased to VND8 trillion from VND4.8 trillion earlier this year. The NPL ratio rose to 1.5 percent from 0.9 percent in late 2014. VietinBank’s fifth-group debts (the debts with the highest risk) by the end of March had increased by 2.6 times from VND2 trillion to VND5.5 trillion. By the end of April 2015, while Sacombank’s outstanding loans had increased by 5.6 percent, the bad debt ratio had also increased to 1.19 percent from 1.18 percent at the end of 2014. Sacombank collected VND200 billion worth of principal this year thanks to the sale of debts to the Vietnam Asset Management Company (VAMC), while it is considering selling more debts to the company. Though the NPL ratio has stayed at 1.42 percent, Nam A Bank’s situation is not good because the fifth-group debt accounts for over 80 percent of NPL. Therefore, economists are worried about the State Bank’s plan to lower the bad debt ratio to below 3 percent prior to August 31. Nevertheless, bankers have said that the bad debt situation is not as serious as reported. An executive of Sacombank noted that the bad debt increase in the first quarter of the year was partly due to the expiration of Decision 780, which allows credit institutions to restructure their debts. Its validity expired in April 2015. Now banks have to classify their debts in accordance with stricter requirements. The executive said that new loans have been put under very strict control. The representative of ACB also was optimistic about the bad debt settlement, saying that the recovery of the markets, especially real estate, should create favorable conditions for bad debt settlement. Nguyen Hoang Minh, deputy director of the HCM City Branch of the State Bank of Vietnam, praised the commercial banks’ efforts to reduce bad debts. In general, Minh said bad debt settlement had shown satisfactory results. Local banks in HCM City settled VND6.112 trillion worth of bad debts in the first three months of 2015. “It is quite feasible to lower the NPL ratio to below 3 percent because credit has been growing well,” Minh said. DNSG