According to the audited consolidated financial statements for 2022 of the four banks, Vietcombank, VietinBank, BIDV and Agribank, the value of collateral for loans at the banks exceeded VND2 quadrillion each.
Leading is Agribank with VND2.53 quadrillion, followed by VietinBank with VND2.5 million quadrillion, BIDV with VND2.46 quadrillion and Vietcombank with VND2.1 quadrillion.
In the collateral, real estate still accounted for the majority. Especially at Agribank, the collateral that is real estate reached nearly VND2.29 quadrillion, accounting for about 91 per cent of total collateral and increasing 13 per cent compared to the end of 2021.
The ratio of real estate in total collateral at the remaining three banks also ranged high, from 68-74 per cent.
Real estate is always the preferred asset to secure loans at banks. According to calculations by financial data service provider FiinGroup, up to 70 per cent of collateral for loans in the Vietnamese banking system is currently real estate. The value of collateral as real estate in the banking industry is up to VND16-17 quadrillion.
Pham Thi Hoang Anh, Deputy Director of Banking Academy, said bank collateral assets are now very diverse, from real estate to cars, motorbikes, yachts and deposits.
However, as most Vietnamese people often think real estate is an asset that always maintains prices and can increase in the future, the main and most popular asset used to secure loans is real estate.
Banks often prefer real estate as mortgaged assets as it is easy to value and monitor the mortgages during and after loan disbursement as the assets cannot be moved.
In addition, the liquidity of real estate is always better than other commodities, so the recovery of debts through a collateral settlement can be easier.
However, as the real estate market has been slowing, it is not easy for banks to sell bad debts mortgaged with real estate to recover the debts despite big sell-off.
For example, the debt of BBP Paper Joint Stock Company at VietinBank has been offered for sale for the 18th time. The debt has a temporary value as of June 30, 2022, VND389.2 billion, but the bank still found no buyer though the starting price announced by VietinBank at the latest auction recently for the debt was only less than VND65 billion.
In the context that the real estate and corporate bond markets are less active than in the past, experts believe holding real estate as collateral brings more risks to banks.
According to FiinGroup, the banking system is facing potential bad debt risks from the real estate credit portfolio as the sale of the mortgaged real estate is difficult due to the slowdown of the real estate market.
Experts said it would be difficult to find investors with enough financial potential to buy back large debts. At the same time, there remain hurdles in legal procedures in handling collateral assets such as real estate. — VNS