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Wednesday, July 17, 2024

Banks see bad debt soaring

The Saigon Times

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HCMC – Bad debt in Vietnam’s banking system soared in the first half of this year and is expected to rise further in the coming months.

The lackluster business performance and financial distress among borrowers are contributing to this worrisome trend.

According to financial statements from seven banks, namely TPBank, BaoVietBank, ABBank, Bac A Bank, LPBank, PGBank and Techcombank, non-performing loans skyrocketed in the first six months of the year.

TPBank’s bad debt alone amounted to VND3.9 trillion, a staggering threefold increase from January. The other six banks also saw a significant rise in bad debt, with an increase ranging from 12.7% to a jaw-dropping 65%.

TPBank’s non-performing loans surged 5.6 times to VND2.15 trillion, and doubtful debts rose nearly 2.5 times to VND1.13 trillion. This led to its ratio of non-performing loans to total gross loans soaring from 0.84% at the beginning of the year to 2.21%.

The situation is not much better for other banks. They saw their ratios of non-performing loans to total gross loans edge up between 15 to 166 basis points.

BaoVietBank’s potentially irrecoverable debt doubled to VND1.5 trillion, while LPBank’s bad debt shot up by 80% to VND2.4 trillion.

The state-owned commercial banks have also faced challenges. VietinBank, despite controlling its bad debt ratio at 1.1%, grapples with a high coverage ratio for bad debt at 170%.

Nguyen Thanh Tung, Vietcombank’s general director, said his bank’s bad debt ratio stood at 0.85% at the end of June, the lowest in the banking system, but it has increased by 17 basis points since late 2022. The bank’s coverage ratio for bad debt is over 350%.

Agribank, which managed to reduce its bad debt ratio to 1.86% through restructuring during 2016-2020, now faces challenges due to adverse macroeconomic conditions and difficulties in domestic and international markets. Many businesses are struggling with debt repayment, resulting in bad debt rising.

Pham Duc An, Agribank’s chairman, warned that the bad debt ratio may continue to grow in the near future.

Experts predicted that bad debt may rise even further. Once Circular 02/2023 expires, these debts will be reclassified, leading to bad debt increasing sharply in 2024.

In response to the growing bad debt, VietinBank has attempted to recover debt by selling and auctioning off collateralized assets and non-performing loans.

However, the process has faced challenges, as valuable collateral assets related to real estate have weak market demand, according to Nguyen Quoc Hung, general secretary of the Vietnam Banks Association.

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