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Tuesday, July 16, 2024

Bad debt worries

By V. Dung

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The State Bank of Vietnam (SBV) has recently sounded the alarm over the escalating volume of bad debt within the real estate sector, substantiated by specific figures. Despite reinforced loan loss provisions, commercial banks remain apprehensive about the downward trajectory of the real estate market and associated bond risks. Consequently, they are intensifying efforts to liquidate collateral assets, but encountering problems in the process. Resilience within the banking sector The semi-annual financial reports of 29 banks revealed a 34% surge in non-performing loans since the beginning of the year, reaching a total of VND219,747 billion. In contrast, provisions for credit risks increased by only 10% to approximately VND225,327 billion. The escalation of bad debt has outpaced the growth in risk provisions, causing a substantial decline in bad debt coverage ratios—an essential metric used to evaluate a bank’s ability to withstand risks associated with bad debt. Notably, 24 out of the 29 commercial banks reported an average decrease of 27 percentage points in their bad debt coverage ratios compared to the beginning of the year. Lender MB experienced the most significant reduction, with an 82-percentage-point decline in the bad debt coverage ratio—from 238% to 156.1%. Similarly, TPB posted a 74-percentage-point decrease, […]
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