Nguyen Ngoc Bao, Chairman of the state-owned Vietnam Bank for Agriculture and Rural Development (Agribank) discussed the bank’s improved management plans after racking up the highest level of bad debts among local banks in 2012.
Nguyen Ngoc Bao, Chairman of Agribank's Board of Members
Agribank is one of the biggest Vietnamese banks in terms of total assets, branches and personnel. However, its financial results have been poor. As chairman, what do you say about these problems?
In the last two years, business has been better. The capital adequacy ratio has increased from 7% to 9%. The ratio of bad debts which reached 8% has now reduced to 5.6% and we established a huge risk prevention fund in 2012.
If we use the fund, the bad debts could be reduced to 3% in 2014.
Most banks face liquidity problems as Tet nears, what about Agribank?
Business has been good. Deposit and credit rates have increased and with VND70 trillion (USD3.4 billion) in our risk prevention fund, we will be able to ensure healthy liquidity during Tet.
In the past individual deposits accounted for only 50% of the total savings. But now, deposits from individuals and small and medium-sized enterprises accounted for 70% of the bank's deposits.
What challenges does Agribank currently face? Many banks are becoming stricter in issuing loans. Do you think that the banks are switching from being too lax to too strict?
We determined that the real estate sector posed the most challenges. 70% of our bad debts lie in Hanoi and HCM City and belongs to this sector. The loans for this sector are always more risky, but no matter what, our business will not be affected.
Moreover, we have also adjusted mechanisms and will focus more on small and medium sized enterprises as well as businesses in rural areas.
Due to high risk and limited evaluation skills, we may not give loans to huge and long-term project such as traffic or hydropower projects. Other projects will be strictly appraised.
Several former chairmen were recently arrested, leading to public concern. What do you think about the personnel management?
There are two most important factors, new recruits and continued staff training. We, of course, have very strict hiring and training processes and high ethical and work standards. Leaders must prove their ability and work ethics. Agribank are monitoring the work very closely.
If the bank has a bad debt ratio higher than 3% or low revenues, the directors will be warned and have some of their powers curbed.
Agribank is focusing on the rural areas. We are giving farmers VND50 million loans and VND500 million for cooperatives without forcing people to put up collateral.
