The Banking Inspection and Supervision Department (TTGS), State Bank of Vietnam, Dong Nai Branch, recently announced the inspection conclusion of the Prosperity and Development Joint Stock Commercial Bank, Dong Nai Branch (PGBank Dong Nai).

By July 31, 2024, PGBank Dong Nai's capital mobilization balance will reach VND 276,240 billion, an increase of 4.4% compared to December 31, 2023.

The branch's total outstanding loans as of July 31, 2024 are VND 762,303 billion, an increase of 8.4% compared to December 31, 2023. Of which, overdue debt accounts for 5.9% of total outstanding debt. Bad debt (group 3-5) accounts for 4.4% of total outstanding debt.

In the 3 years from 2021-2023, PGBank Dong Nai only completed over 50% of the growth plan assigned by the Head Office.

pgbank pgd.jpg
Announcing the inspection conclusion for PGBank Dong Nai. Photo: PGBank

According to the conclusion of the TTGS, the credit quality (group 2 debt and bad debt) of PGBank Dong Nai during the inspection period always exceeded the safety limit (over 3%), which significantly affected the business performance of the branch. In addition, there are some remaining problems.

The appraisal and approval of loans were not fully implemented according to the provisions of Article 17 of Circular 39/2016/TT-NHNN of the State Bank of Vietnam (Circular 39) and internal regulations for 16 customers (20 credit contracts) with a total outstanding debt of more than VND 130 billion.

Lending but not collecting and supplementing complete loan documents according to regulations in Article 9 of Circular 39 and internal regulations of PGBank for 5 customers (5 credit contracts) with total outstanding debt of 16,911 billion VND.

The work of checking and supervising loans has not been fully implemented according to the provisions of Article 24 of Circular 39 and internal regulations of PGBank for 22 customers (31 credit contracts) with a total outstanding debt of VND 165,639 billion.

Regarding the misuse of capital, customers borrowed capital but did not use the capital for the right purpose according to the credit contract agreement, violating the principles of lending and borrowing capital according to the provisions of Article 4 of Circular 39 for 3 customers (3 credit contracts) with a total outstanding debt of 12.70 billion VND.

Regarding the conditions for approving the parent company's commitment to repay the debt, TTGS pointed out the potential risks in performing the debt repayment obligation on behalf of the parent company's borrowing company when the parent company's financial situation or when many other subsidiaries and affiliated companies have business problems, arising overdue debts/bad debts.

TTGS also warns of risks in credit granted to car trading companies secured by inventories of new cars of all kinds managed by customers (goods formed from loan capital).

This inventory is traded by customers every day (sold), so it is easy for customers to sell their cars without notifying the bank, leading to customers selling their cars and using the capital for other purposes without paying the bank.

TTGS recommends that PGBank Dong Nai, in addition to regular inspections according to internal regulations, should proactively and regularly conduct surprise inspections of collateral assets to ensure that inventory mortgages are released in accordance with regulations and that inventory value is always sufficient to ensure customer obligations at all times; at the same time, it is necessary to closely monitor customer finances, regularly assess business performance, and monitor customer revenue to have appropriate credit measures, minimizing risks for PGBank.

TTGS requested the Director of PGBank Dong Nai to review all existing problems and learn from the existing problems and violations in the branch's operations. Requested PGBank to strengthen internal inspection and control of Dong Nai Branch; organized a meeting to review the responsibilities of those involved.

PGBank is a bank with a fairly concentrated shareholder structure. According to the list of shareholders owning 1% or more of charter capital recently announced by PGBank, 3 institutional shareholders and 13 individual shareholders hold a total of 97.416% of the bank's charter capital.

Of which, 3 institutional shareholders hold 40% of PGBank's charter capital after acquiring 120 million PGBank shares from Petrolimex in April 2023, including: Cuong Phat International Joint Stock Company (13.541%), Vu Anh Duc Trading Joint Stock Company (13.360%), and Gia Linh Import-Export and Trade Development Company Limited (13.099%).

All three legal entities mentioned above have leaders who are more or less related to Thanh Cong Group (TC Group) of Chairman Nguyen Anh Tuan, a corporation that assembles and distributes Hyundai brand cars in the Vietnamese market.