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Banks step up auctions to resolve bad debts

Banks are putting non-performing loans (NPLs) and collateral of default borrowers on auction in a move to speed up the resolution of bad debts.

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banks step up auctions to resolve bad debts hinh 0

Most NPLs are attached to assets borrowers bought or created thanks to these loans, including real estate, factories, enterprises, industrial clusters and projects.

Agribank Management Company (Agribank AMC) announced that it would hold 12 auctions this month to sell bad debts and collateral totalling a starting price of more than VND470 billion (US$20 million).

The auctions include three land lots in HCM City’s District 9 with a starting price of VND93.23 billion; properties belonging to Life Pro Vietnam Company at a starting price of VND257.4 billion, and a plot on Hanoi’s Nguyen Thai Hoc Street at a starting price of VND68.5 billion.

After repurchasing all NPLs sold to the Vietnam Asset Management Company, VietinBank has recently also announced it will be selling collateral to recoup the debts.

VietinBank is planning to sell the debt belonging to Song Day-Hong Ha Oil and Gas Joint Stock Company, which has a factory, cars, machinery, a production line and goods in stock. The debt has been valued at VND66.18 billion, including both principal and interest rates, as of August 16 this year.

The bank has also announced it will sell inventory worth nearly VND111 billion of NEM Trading Joint Stock Company.

Sacombank also plans to hold an auction on September 27 to sell 11 properties related to non-performing loans and collateral of its borrowers at a starting price of more than VND10 trillion.

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All the properties are real estate projects in southern HCM City and Ba Ria-Vung Tau Province. Among them, the Phong Phu Industrial Zone, which covers an area of 134 hectares in HCM City’s Binh Chanh District, has a starting price of over VND7.6 trillion. To take part in Sacombank’s auction, investors must deposit in advance 5% of the properties’ starting prices.   

Sacombank recovered more than VND3.6 trillion worth of bad debt in the first half of the year, bringing its non-performing loan ratio to 3.3% compared to 4.28% at the end of last year. The bank expects to bring down the bad debt ratio to 3% by the end of this year. 

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Besides banks, the Vietnam Asset Management Company (VAMC), which is under the State Bank of Vietnam (SBV)’s management and is in charge of buying bad debts from commercial banks, has recently put bad debts up for auction.

The company will auction bad debts belonging to Dong Thien Phu Group Joint Stock Company that it bought from Agribank for VND220.1 billion.

The VAMC also plans to auction collateral from Golden City Limited Company which it bought for VND76.3 billion, giving it the rights to 7,851 sq.m of land in HCM City’s District 9.

According to Nguyen Van Du, the SBV’s deputy chief inspector, enhanced legal frameworks in the National Assembly’s Resolution 42/2017/QH issued last year had helped banks and the VAMC better manage bad debts by allowing them to rapidly repossess collateral if borrowers default.

According to the SBV’s report, at the end of June this year, banks had handled VND138.29 trillion of bad debt following Resolution 42, contributing to reducing the bad debt ratio in the entire banking system from 2.46% on December 31, 2016 to 2.09%.

VNS

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