For every VND100 that businesses have, they borrow VND65: FiinGroup

FiinGroup’s president Nguyen Quang Thuan said the ratio is calculated based on more than 1,000 listed enterprises.

Controversy has been raised among economists these days about the conclusion of a group of experts that the GDP generated every year is not big enough to pay loan interests.

For every VND100 that businesses have, they borrow VND65: FiinGroup

FiinGroup’s president Nguyen Quang Thuan



The group of experts reported that the total outstanding loans of non-financial enterprises had reached VND13,800 trillion and their total capital VND22,000 trillion.

FiinGroup’s president and CEO Nguyen Quang Thuan disagrees with the viewpoint.

FiinGroup’s data from 1,019 enterprises listing shares on three bourses shows that the Debt/Equity (DE) ratio of Vietnam’s public companies is at 0.65. This means that for every VND100 worth of capital they have, they would borrow VND65.
 

FiinGroup’s data from 1,019 enterprises listing shares on three bourses shows that the Debt/Equity (DE) ratio of Vietnam’s public companies is at 0.65. This means that for every VND100 worth of capital they have, they would borrow VND65.


This level of financial leverage, in theory, is safe, because it is lower than 1x. However, it is still necessary to consider other factors as well, including the typical characteristics of industries.

For example, the ratio of the real estate sector is on the decline and staying at 0.57 at the end of Q3 2019 (the figure was calculated based on 110 real estate firms).

This is because real estate developers have reduced loan use while their clients borrow to buy houses under the cooperation programs between real estate developers and banks.

The outstanding loans provided to house buyers have increased rapidly in the last five years, accounting for 13.14 percent of total outstanding loans. Meanwhile, the loans provided to real estate firms just account for 6.1 percent.

So, when assessing the risk of the real estate sector, they not only consider the risk for real estate firms, but also the hundreds of thousand of clients who borrow to buy houses.

Regarding the Interest Cover index, FiinGroup’s data shows that it was 3.5x in 2018. This means that for every VND3.5 dong enterprises could create, VND1 was used to pay loan interest. This is relatively safe.

However, the index will decrease slightly in 2019 because there are signs of decrease in EBIT (Earnings Before Interest and Taxes) and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

It is unreasonable to calculate the cost in loan interest based on the total liabilities, because the total liabilities comprise items which don’t mean ‘borrow’ by nature and enterprises don’t have to pay debts.

If non-financial enterprises had stockholder equity of VND8,500 trillion in 2017 as reported by the group of experts, with the D/E at 0.65 as above, the debt would be VND5,500 trillion, not VND13,800 trillion.

The D/E of 0.65 is calculated for public companies. Meanwhile, the unlisted companies are believed to have a lower financial leverage level. 

Kim Chi

Military Bank gets nod to increase charter capital to more than $1 billion

Military Bank gets nod to increase charter capital to more than $1 billion

The State Bank of Viet Nam has approved Military Commercial Joint Stock Bank (MB)’s proposal to increase its charter capital to VND24.42 trillion (US$1.06 billion) from VND23.73 trillion.  

Registered capital at major state-run banks to be raised in Q1

Registered capital at major state-run banks to be raised in Q1

All four major state-run banks, including Vietcombank, Vietinbank, Agribank and BIDV, are expected to qualify for Basel II standards in 2020.

 
 

Other News

.
Honda Vietnam suspends production due to COVID-19
Honda Vietnam suspends production due to COVID-19
BUSINESSicon  02/04/2020 

Honda Vietnam (HVN) has become the fourth automaker in Vietnam to suspend production and assembly of cars and motorbikes over the concerns of the COVID-19 pandemic.

VN central bank asks for cut in electronic fund transfer fees
VN central bank asks for cut in electronic fund transfer fees
BUSINESSicon  02/04/2020 

The State Bank of Vietnam (SBV) on March 31 issued a directive to reduce the fees for transactions via interbank electronic payment system by 50 percent for local banks.

Banks maintain normal operations during national social distancing
Banks maintain normal operations during national social distancing
BUSINESSicon  02/04/2020 

Banking services will remain available to meet the transaction demands of businesses and individuals, according to the State Bank of Vietnam (SBV).

Bank customers warned of fraud amid COVID-19 pandemic
Bank customers warned of fraud amid COVID-19 pandemic
BUSINESSicon  02/04/2020 

Banks have warned customers about fraud during the COVID-19 pandemic, advising them not to open suspicious emails or click on dubious links sent as email attachments related to the pandemic.

Finance Ministry asks insurers not to sell COVID-19-related products
Finance Ministry asks insurers not to sell COVID-19-related products
BUSINESSicon  02/04/2020 

The Ministry of Finance has asked insurers to stop introducing and selling insurance packages related to COVID-19.

Securities trading uninterrupted during COVID-19 fight: SSC
Securities trading uninterrupted during COVID-19 fight: SSC
BUSINESSicon  02/04/2020 

Trading on the Vietnamese securities market was essential and would not be disrupted under any circumstances during the fight against COVID-19, the State Securities Commission (SSC) said on March 31.

Restaurants, coffee chains in Vietnam switch to selling online delivery
Restaurants, coffee chains in Vietnam switch to selling online delivery
BUSINESSicon  02/04/2020 

After HCM City decided to temporarily close restaurants and catering services with the capacity of more than 30 customers, they began selling online and delivering food.

Nosediving oil price deals a blow to state budget
Nosediving oil price deals a blow to state budget
BUSINESSicon  01/04/2020 

Though the steep dive in global crude oil price will benefit domestic logistics and production, it will not be good for local petrol firms and the state budget.

Coronavirus: Stock markets suffer worst quarter since 1987
Coronavirus: Stock markets suffer worst quarter since 1987
BUSINESSicon  01/04/2020 

The Dow Jones and FTSE 100 have fallen more than 20% since the start of the year.

Ministry of Industry and Trade proposes resuming rice exports
Ministry of Industry and Trade proposes resuming rice exports
BUSINESSicon  01/04/2020 

The Ministry of Industry and Trade (MoIT) has proposed resuming rice exports from April, with a volume of 400,000 tonnes, after it has compiled reports on production, domestic consumption and exports to submit to the Prime Minister.

Addressing NextGen unique needs
Addressing NextGen unique needs
BUSINESSicon  01/04/2020 

The next generation is ready to take the baton at Vietnamese family businesses, putting to the task their fresh ideas.

Textile makers skirt virus disruptions
Textile makers skirt virus disruptions
BUSINESSicon  01/04/2020 

Temporary factory closures and imminent layoffs are going to push textile and garment enterprises into deep water due to a lack of raw materials as well as mass order cancellations from European and American buyers.

Another automaker in Vietnam halts operation
Another automaker in Vietnam halts operation
BUSINESSicon  01/04/2020 

TC Motor has said that it will halt vehicle production in the northern province of Ninh Binh from April 1 to 15 over concerns of the COVID-19 pandemic.

Mekong Delta faces rice crisis as exports are interrupted
Mekong Delta faces rice crisis as exports are interrupted
BUSINESSicon  01/04/2020 

Hundreds of thousands of tons of rice in Mekong Delta remain unsold as merchants have stopped collecting rice. Farmers fear the rice price will drop dramatically if Vietnam stops exporting rice.

Exports suffer during Covid-19 crisis as orders are cancelled or delayed
Exports suffer during Covid-19 crisis as orders are cancelled or delayed
BUSINESSicon  01/04/2020 

Some countries have temporarily closed shopping centers and asked people to stay at home to prevent the spread of coronavirus, which has affected exports of Vietnamese enterprises.

PetroVietnam may buy crude oil to store
PetroVietnam may buy crude oil to store
BUSINESSicon  01/04/2020 

As Covid-19 has been escalating and the oil price has fallen, the national oil and gas group PetroVietnam is considering several possible scenarios, including mine closure. It is also considering buying crude oil to store.

Vietnamese economy stays resilient to external shocks: WB
Vietnamese economy stays resilient to external shocks: WB
BUSINESSicon  31/03/2020 

While Vietnam remains significantly exposed to the COVID-19 outbreak and the ongoing turbulence in the global financial markets, its economy stays resilient to external shocks in the first few months of 2020, according to the World Bank (WB).

Food processing firms step up production, focus on safety measures for workers
Food processing firms step up production, focus on safety measures for workers
BUSINESSicon  31/03/2020 

Food processing firms in Ho Chi Minh City have stepped up production to meet demand while also enhancing safety measures for their staff amid the Covid-19 pandemic.

Fresh fruit exported to China in refrigerated containers
Fresh fruit exported to China in refrigerated containers
BUSINESSicon  31/03/2020 

Export of fresh fruit to China via train using refrigerated containers has contributed to curbing the spread of the COVID-19 pandemic.

Business survey to begin on April 1
Business survey to begin on April 1
BUSINESSicon  31/03/2020 

The General Statistics Office (GSO) is scheduled to begin a survey of businesses on April 1 with a view to collecting basic information to serve management and policy making, Deputy General Director of the office Nguyen Trung Tien said.

 
 
 
Leave your comment on an article

OR QUICK LOGIN