Update news bad debts
The bad debt ratio of the banking system skyrocketed from 2 per cent at the beginning of this year to 3.56 per cent, or more than VNĐ440 trillion, at the end of July 2023, according to the latest data from the State Bank of Vietnam (SBV).
The leader of the State Bank of Vietnam (SBV) said that the non-performing loan ratio in the real estate sector is on the rise compared to the end of the previous year, with figures of 1.8 percent in July 2022 and 2.58 percent in July 2023.
The rise in non-performing loans within the real estate sector has become a cause for alarm as the bad debt ratio escalated from 1.53% in the previous year to 2.47% during the first half of 2023.
Even as the biggest real estate businesses struggle with debts and bankruptcy, banks continue to stay afloat and tackle the bad debt situation over a period of time. This ability of banks helps bank stocks not fall too low, despite overdue payments.
Having hold of a large amount of bad debts mortgaged by real estate, Viet Nam’s four biggest State-owned banks are urgently recovering the debts, but the work remains tough for them due to the slowdown of the realty market.
Businesses in many fields have voiced their concerns about the lack of capital from banks.
When people with an average income have to save 30 years to buy an apartment, this indicates a sign of a real estate bubble. In Vietnam, this figure is an average of 57 years.
Many banks are rushing to sell land and other assets used as collateral for loans to collect debts, including properties worth trillions of dong.
Banks have been increasing the attraction of deposits to have enough capital for the credit needs of customers. Credit demand is expected to increase from the first quarter of this year.
Though businesses need the Government’s economic recovery packages to rebound from the pandemic, the Government should consider limiting the participation of commercial banks in the packages to help them avoid bad debt risks, experts suggest.
Many banks have recently offered to sell mortgaged assets, mainly real estate, worth billions of VND, to recover debts amid the recovery of the realty market.
Bad debts may climb by the end of the year as the pandemic has interrupted the production of many enterprises and they had no revenue to repay debts.