Mounting arrears: A vendor counts Vietnamese dong banknotes in Da Nang. According to SBV, the main cause of the increase in bad debt in the banking system is due to many factors, including an unfavourable macroeconomy and natural disasters. — Bloomberg
HANOI: Though bad debts increased in the third quarter of this year (3Q24), they are expected to slow in the near future as macroeconomic factors are supporting the handling of the debts.
According to banks’ financial reports released recently, many banks including large-scale banks recorded an increase in bad debts in 3Q24.
Specifically, by the end of 3Q24, state-owned Vietcombank’s total amount of subprime debts, doubtful debts and potentially irrecoverable debts increased sharply by 35.8% compared to the beginning of the year, exceeding 17.1 trillion dong.
The bank’s bad debt ratio also increased from less than 1% at the beginning of this year to 1.22%.
At state-owned VietinBank, the bad debt ratio by the end of 3Q24 was 1.57%, up from 1.13% at the beginning of this year.
Bad debts at private commercial banks also increased in 3Q24.
MSB’s bad debt ratio at the end of the third quarter was nearly 2.88% of total outstanding debts, a slight increase compared to 2.86% at the end of 2023.
Notably, the bank’s potentially irrecoverable debts surged sharply by 66%.
At Techcombank, the bad debt ratio at the end of September 2024 was at 1.35%, up from 1.28% at the end of June.
In addition, the bank’s bad debt coverage ratio also increased slightly to 103%.
At ACB, total bad debt increased to 8.27 trillion dong at the end of 3Q24, of which potentially irrecoverable debts surged by 55% compared to the beginning of this year to 6.06 trillion dong.
The bank’s bad debt ratio rose from 1.22% at the beginning of this year to 1.5% at the end of September.
At PGBank, as of the end of the third quarter of 2024, the bad debts were 1.17 trillion dong.
This is an increase of 16.6% compared to the beginning of the year.
Therefore, the bank’s bad debt ratio increased from 2.85% to 3.19%.
Similarly, at LPBank, bad debts increased by 70%, from nearly 3.69 trillion dong to more than 6.27 trillion dong, bringing the bad debt ratio to 1.96%.
According to the State Bank of Vietnam (SBV), the main cause of the increase in bad debt in the banking system is due to many factors, including an unfavourable macroeconomy and natural disasters.
“Bad debt is on the rise, especially after Typhoon Yagi.
“This is also a problem that the banking industry has to face and needs to have a solution in the coming time,” the SBV said.
Notably, the SBV said, the Vietnamese economy is still in the process of recovering from the Covid-19 pandemic and the global economic crisis.
Although the Vietnamese government has introduced many policies to support businesses, the recovery rate is still slow and many businesses are still facing difficulties in restoring production and business activities.
Despite the bad debt increase, experts believe it will slow next time as macroeconomic factors are supporting the process of handling bad debts.
Specifically, new amended laws, including the Land Law, the Housing Law and the Real Estate Business Law, which officially took effect from August 2024, will create a boost for the real estate market that will help banks handle collateral (mainly real estate) and recover bad debts.
In addition, under the new amended Law on Credit Institutions, from Aug 1, 2024, banks will be allowed to transfer all or part of real estate projects as collateral to recover debt.
The law also allows expanding the subjects and scope of bad debt trading, including debt purchase from credit institutions and foreign bank branches.
This will help thoroughly handle bad debts at many banks. — Viet Nam News/ANN
