Kasikorn Bank brings perspective to Vietnam’s NPLs

On the sidelines of a VAMC and Kasikorn Bank-hosted event on “Managing distressed assets” recently, the bank’s executive vice president Pattarapong Kanhasuwan tells VIR’s Trang Nguyen how it can bring the experience in dealing with distressed assets after Thailand’s 1997 financial crisis to Vietnam’s bad debt situation.

Kasikorn Bank has been present in Vietnam for a few years now as representative offices. Can you tell us more about the bank, its operations in the country, and also its plans for the local market?

Kasikorn Bank (KBank) has been established for 72 years already, and we’re now the fourth-largest commercial bank in Thailand in terms of assets. Right now, we also implement AEC+3 strategy aiming for  a regional connectivity strategy through the expansion of our network in the AEC region, plus Japan, China, and the Republic of Korea.

We’ve established two representative offices in Vietnam, one in Hanoi and another one in Ho Chi Minh City. Those two representative offices are now working in collaboration with authorities and regulators, as well as Thai and Vietnamese business communities, in order to promote trade and investment between the two countries. 

Our ultimate goal in Vietnam is to open a branch, so we can contribute more in the form of providing both credit and supporting investment, especially for FDIs from Thailand to Vietnam. Additionally, we can facilitate the international trade as the two countries mutually set to increase their two-way trade volume up to $20 billion by 2020.

With that in mind, it will be great if we are allowed to operate as a full commercial branch in Vietnam in the future.

Bad debts have lately been a hot topic in Vietnam. Why are you hosting this seminar on distressed assets, and what is your take on Vietnam’s Resolution 42, which rules on the handling of non-performing loans (NPL)?

Bad debts are unfortunate by-products of economies which emerge from time to time, no matter how big or small the economy is.

Thailand has had previous experience in bad debts, in one of the biggest events that resulted in the worst economic slump in our history in 1997. The reason or the cause of the economy crisis always varies from country to country. In Thailand at the time, one of the major causes of the problem was that the economy was growing at more than 10 per cent for many years, and we borrowed excessively from foreign markets. So once the Thai baht was devalued, the debts doubled for most of the businesses and operations.

We’ve learnt the hard lesson from that, but the main question is how we can get out of those bad situations as quickly as possible. Today’s event is mainly to share our experience on how we handdled the situation, and how to prevent such a problem from happening again in the future.

What I understand of your  the new law is that it enables the asset management companies (AMCs) as well as the lenders to expedite the foreclose processes on assets, and this is a very important part. However, we also need to think ahead for the next step, especially on how Vietnam Asset Management Company (VAMC) can quickly liquidate those distressed assets.

How did Thailand succeed in dealing with rising levels of bad debt after the 1997 financial crisis? Can the experiences and lessons learnt by the Thai government and KBank be applied in Vietnam?

For bad debts, it’s good news among the bad news: every country will eventually get out of the trouble of bad debts; what really matters are how long will it take and at what expenses for getting out of the issue.

In Thailand, we thought that we were going to have a very big problem at that time, yet fortunately when we devalued our currency, the economy bounced back pretty fast.

For Vietnam, I believe the situation is still under control with the guidance of the State Bank of Vietnam and the government. I strongly believe the bad debts issue can be solved fairly quickly.

There are two periods of time critical to resolving bad debts, the first is to stabilise the situation with AMCs – by doing so we’re removing the  NPL from the banking sector and resorting those bad assets for further process. Basically, the government has to help on that and the reason for that is we need to calm down the economy and the investors. Then we can go to the second phase, by liquidating those bad assets and also helping the financial sector to continue growing.

As in the case of Thailand, when the country had entered its economic crisis, it did not have the capacity to resolve the NPL issue itself. This is why I emphasised that the key factor is to solve the problem as quickly as possible with all viable means. At the time, one of the measures that we used was bringing in foreign capitals and investments,   to pay off the cost of the bad debts.

As KBank is looking to further strengthen its foothold in the local market, do you have any plan to get involved or participate in the bad debts market in the country?

I believe that the experience that we’ve had in solving the NPLs in Thailand can also contribute to the banking and financial sector here. Further down the road, once the debt trading market is developed, we can also bring in more investors from countries like Thailand, and other countries, who are also interested in buying some of the distressed assets in Vietnam.