CAR does not improve in 2016
HCMC - The capital adequacy ratio (CAR) of the banking system based on the latest data published by the central bank was 12.84% on December 31, 2016, meaning almost no improvement was made last year.
Joint venture and foreign banks are in the group with the highest CAR while the lowest CAR belongs to State-run banks, at 9.92%. Commercial joint stock banks have an average rate of 11.8%.
CAR is still calculated with the method determined by the State Bank of Vietnam (SBV), not in accordance with the standards of the Basel 2 and the world.
CAR is an important indicator of the health of the banking system in particular and credit institutions in general. The newly published figures suggest CAR barely improved throughout 2016, for it previously stood at 12.65% on June 30, 2016 and 13% on December 31, 2015.
It should be noted that this took place when banks in Vietnam announced positive earnings results in 2016. Many of them reported higher-than-expected profits.
Also according to the data published by the SBV, the system’s equity capital picked up 10.66% last year, equivalent to some VND639.6 trillion. Total assets grew 16.18 to more than VND8,500 trillion.
Chartered capital increases were very modest, 6.11% compared with the end of the preceding year, equivalent to about VND488.4 trillion. Fresh capital injections are currently a major concern of and a great challenge to banks.
The percentage of short-term capital utilized to make medium- and long-term loans was 34.51%, particularly 37.32% at State-run banks and 39.93% at joint stock banks.
ROA (return on assets) and ROE (return on equity) of the system, as per the financial statements for the third quarter of 2016, were 0.45 and 5.66% respectively.
Joint stock banks put their ROA at 0.26% and ROE at 3.49%, while the respective figures at State-run banks were 0.47% and 8.24%. Those credit institutions with negative equity were already eliminated when such rates were calculated.
The ratio of credit to deposits in November 2016, the latest update, was 86.72%. This ratio was particularly high at State-run banks, 94.43%, while the joint stock ones registered a rate of 79.37%.
It should be noted that the above figures are only relative and do not fully reflect the health of the system of credit organizations in Vietnam. It is because the statistics are based on account balance reports and monthly statistical reports for December 2016 that credit institutions sent to the SBV, with those with negative equity capital already excluded when such indicators as equity capital and CAR were calculated.