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Banking & Finance

ACB to offset deposit in GPBank through real estate

Released at: 15:19, 20/08/2016

ACB to offset deposit in GPBank through real estate

Photo: Duc Anh

Bank finalizing paperwork in bid to reclaim deposit in failed bank.

by Duy Anh

The Asia Commercial Bank (ACB) is currently finalizing the paperwork for the transfer of real estate belonging to Global Petroleum Bank (GPBank) to offset its deposit of VND252 billion ($11.3 million) with the bank.

Inter-bank deposits have been a problem for ACB in recent years. In seeking high interest rates it has suffered greatly, with the majority of its profit being eroded by huge risk provision for such deposits.

ACB’s recent annual general meetings saw shareholders express concern over the bank’s ability to reclaim major deposits at banks that no longer formally exist and loans from six companies of the former Chairman Nguyen Duc Kien, known as “Mogul Kien”.

During the period when Vietnam’s banking system was grappling with liquidity issues, banks with high charter capital such as ACB were chasing high interest rates through inter-bank deposits.

Then GPBank and Construction Bank (CBBank), previously known as the Vietnam Construction Bank (VNCB), in which ACB had millions of dollars in deposits, were both acquired by the State Bank of Vietnam (SBV) for no payment. The deposits therefore became frozen and ate into ACB’s profits.

It was reported on January 31, 2015 that SBV had acquired CBBank for no payment. ACB’s deposit of VND400 billion with CBBank has therefore been classified as uncollectible.

On December 25, 2015, ACB sent Official Correspondence No. 7261 to the SBV, asking that the central bank approve adjustments to the maturity date of the deposit and funds on deposit.

SBV then issued Official Correspondence No. 10005, which approved ACB’s deposit of VND400 billion ($17.94 million) with CBBank being paid annually with a maturity of September 30, 2020.

As at the end of the second quarter, ACB’s total risk provision for the deposit with GPBank was reported at VND165.6 billion ($7.43 million), slightly down from VND176.1 billion ($7.9 million) at the end of 2015.

ACB’s bad debt ratio fell from 1.31 per cent at the beginning of the year to 1.24 per cent as at the end of the second quarter. Despite the falling ratio, ACB’s bad debts by value reached VND3.37 trillion ($151.14 million) as at June 30, up VND455 billion ($20.4 million) compared to the end of 2015.

Uncollectible debts as at June 30 were reported at VND1.34 trillion ($60.1 million), up 26 per cent compared to the start of the year.

Its consolidated financial statement for the first half also pointed out deposits of VND772 billion ($34.6 million) with GPBank.

ACB’s deposits were split into two parts. As at March 31, 2014, regarding the deposit of VND252 billion ($11.3 million), ACB signed an agreement to extend the maturity date for another 24 months, to September 4, 2016.

On December 25, 2015, ACB sent Official Correspondence No. 7261 to SBV seeking the central bank’s approval of the transfer of GPBank’s bonds and real estate to ACB.

This aimed at offsetting a deposit of VND252 billion ($11.3 million) and interest gained from the deposit. On December 29, 2015, SBV released Official Correspondence No. 10005 approving ACB’s request.

On April 7 ACB received VND520 billion ($23.3 million) in bonds from a domestic joint stock company to offset its deposit of VND520 billion ($23.3 million) with GPBank.

For the remaining VND252 billion ($11.3 million) to be offset, ACB is currently finalizing the paperwork to receive GPBank’s real estate.

Acknowledging the concerns of shareholders, CEO Mr. Do Minh Toan told the 2016 annual general meeting that he was committed to turning these loss-making inter-bank deposits into profit-making assets.

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