return icon Vietnamnet.vn

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.

 

{keywords}

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.

MORE NEWS

Vietnam posts US$10.6 billion trade surplus in Jan-Nov

The country’s exports amounted to US$342.2 billion while its import spending totaled US$331.6 billion between January and November, generating a trade surplus of US$10.6 billion, according to the General Statistics Office of Vietnam.

What are Vietnam’s opportunities in the face of new reforms in China?

Vietnam-China relations in the past were based mostly on trade and construction bids. What will be important for the new period?

US spends over US$13 billion purchasing local computers and electronics

Vietnamese electronic computers and component exports to the United States during the initial 10 month of the year surged by 26.4% to reach US$13.23 billion against the same period from last year.

Experts discuss need for capital disbursement, loans to enterprises

More public investment funds should be disbursed and credit limits lifted to provide capital and improve capital flow, experts have said.

Vietnam welcomes 2.95 million foreign tourists over 11-month period

The country welcomed 2.95 million foreign visitors during the initial 11 months of the year, a figure 21.1 times higher compared to the same period from last year, but still down 81.9% compared with pre-pandemic levels in 2019.

Ministry to tighten control of joint training programs with foreign partners

About 25,000 students are studying in about 300 joint programs with foreign schools in Vietnam.

IPP Air Cargo approval procedure suspended at investor's request

The Transport Ministry has informed to the Prime Minister of a suspension of the approval procedure for the IPP Air Cargo JSC at the request of the carrier’s investor.

Borussia Dortmund touches down in Vietnam

Renowned midfielder Marco Reus and a delegation made up of 123 players and staff from leading German side Borussia Dortmund landed at Noi Bai International Airport on November 29.

National Assembly Chairman begins official visit to Australia

National Assembly Chairman Vuong Dinh Hue and the Vietnamese NA's delegation arrived in Canberra on November 29 evening (local time), starting an official visit to Australia from November 30 - December 3.

VIETNAM NEWS HEADLINES NOVEMBER 29

International Circus Festival to open in December

VIETNAM BUSINESS NEWS NOVEMBER 29

EVN's losses estimated at VND31.3 trillion in 2022

Co la, the food tray that demonstrates Muong ethnic culture in Hoa Binh

For Muong ethnic people, especially those living in Hoa Binh Province, cỗ lá (literally means a food tray displaying several dishes) is more than just a popular food.

Experts call for Hanoi to become a 'creative city'

Cultural industry development is a new issue, and Hanoi does not have much experience promoting its potential advantages.

Apple jumps to second highest seller of smartphones in Vietnam for first time

iPhone accounted for 20.5 percent of market share in Vietnam in October 2022, according to GfK.

Credit concerns affecting Vietnamese stocks should ease soon: VinaCapital

The demand for new housing units in Vietnam is still strong and prices are still affordable, and so the prices of real estate stocks are likely to recover if and when the Government takes action to ease credit conditions.
back_to_top