Vinashin Exposure May Hurt Banks, World Bank Says

Vietnam Shipbuilding Industry Group’s near-bankruptcy may lead to an increase in the non-performing loan ratios at some Vietnamese banks, the World Bank said.

State-owned Vietnam Shipbuilding, known as Vinashin, may account for as much as 3 percent of some local banks’ loan portfolios, Moody’s Investors Service said on Nov. 29. The Hanoi-based company may default on foreign-currency debt over the next 30 days, Standard & Poor’s said yesterday.

The Vietnamese banking system’s profitability will probably “come under pressure” this year, the World Bank said, citing difficulty for banks in maintaining deposit growth because of a weaker currency, concern that dong deposits are being converted into gold and dollars, and the squeezing of interest income due to competition for funds.

“The asset quality of bank portfolios remains an ongoing concern given the unusually high credit growth of the past years and developing, but relatively weak, risk management capacity in the banking sector,” Deepak Mishra and Viet Tuan Dinh of the World Bank wrote in a report released at a conference in Hanoi.

Vietnam’s government needs to make collecting reliable and up-to-date information on state-owned companies’ liabilities and assessing their fiscal risks a priority, Mishra and Dinh wrote.

“Although Vietnamese banks were shielded from the banking crisis in advanced economies, they have their own home-grown concerns,” Masato Miyazaki, the International Monetary Fund’s Asia-Pacific division chief, said in a statement posted on its website today.

Asset Quality Deterioration

Credit growth in recent years “could have resulted in a deterioration of the quality of their assets, including loans to Vinashin and other large-scale state and non-state borrowers,” said Miyazaki.

Vinashin’s situation has undermined confidence in Vietnam’s macroeconomic situation, the United Nations said today in a report released at the Hanoi conference.

“The government is working on Vinashin issues, and there are options,” Deputy Prime Minister Pham Gia Khiem told reporters at the conference, declining to comment further.

The government is “articulating strongly the view that they don’t want there to be any more Vinashins,” Allaster Cox, the Australian ambassador to Vietnam, said at the conference.

--Jason Folkmanis and Nguyen Dieu Tu Uyen in Hanoi. Editors: Chitra Somayaji

To contact the reporters on this story: Jason Folkmanis in Hanoi at folkmanis@bloomberg.net; Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

To contact the editor responsible for this story: Chris Anstey in Tokyo at canstey@bloomberg.net

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