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But low risks of loans likely to cap damage
SOMRUEDI BANCHONGDUANG
Bangkok Bank (BBL) is concerned about high non-performing loans at its Vietnam branch as the country faces mounting economic problems.
Negative economic factors have hurt the Vietnamese economy and could eventually produce more bad debts in the banking sector by the end of this year.
Wittaya Supatanakul, an adviser to Bangkok Bank's international banking group, said the bank's Vietnam branch would be affected by the industry's rising NPLs.
"However, the bank's NPLs at the Vietnam branch are not expected to stay at a significant level, thanks to the low risk of its loan portfolio. We mainly lend to the export and import sectors for overseas customers including Thailand, Taiwan and other Asian countries," he said.
Vietnam's NPLs came mainly from local investors in the real estate sector and loans for stock trading.
In the first five months of this year, property prices in Vietnam fell by 30- 50%. The Vietnam Stock Exchange index plunged to 370 points at the end of June compared to 1,170 points at the end of 2006.
BBL did not make typical loans so the bank could control bad debts at a satisfactory level. Given the current economic uncertainties in Vietnam, the bank needs more prudence in investing in the country and has adjusted business strategies in line with the country's economic environments, Mr Wittaya said.
It is difficult to forecast business operations at the Vietnam branch in the second half as the Vietnamese economy is still uncertain.
The Vietnamese government has limited loan growth for each bank to 30% for this year to relieve the country's double-digit inflation. Inflation stood at 26.8% in June, up from 25.2% in May. The country has revised down its gross domestic product (GDP) growth forecast this year to 7% from 9% earlier.
However, there are opportunities for doing business amid the turmoil. The country's lending rate for the banking system is estimated at 21% on average this year.
Banks will still earn high interest income. Currently, Vietnam is more attractive than Thailand in terms of foreign investment, Mr Wittaya said.
"Vietnam's political stability leads to more investor confidence than Thailand," he added.
Despite the economic slowdown, foreign direct investments in Vietnam were $31.6 billion for the first half of this year, $11 billion more than last year. Vietnam's economic problems are not as serious as Thailand's financial crisis in 1997.
BBL shares closed yesterday on the Stock Exchange of Thailand at 112 baht, up two baht, in trade worth 313.8 million baht.
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