Tide of soured debts will continue to hit Vietnamese commercial banks in 2024, according to experts. (Photo: VNA) Hanoi (VNA) – The banking sector will continue to face great challenges in 2024, especially those from bad debts when Circular 02/2023/TT-NHNN of the State Bank of Vietnam on credit institutions and foreign bank branches' debt rescheduling and maintaining loan categories to help clients in difficulties expires on June 30, 2024.
Economist Dinh Trong Thinh said that although the banking system has worked tostrengthen provision buffer for defaulted loans while reducing lending forrisky areas, when circular 02 expires, the rescheduled debts will return to their original categories, that means bad debts will surge, requiring banks to use their reserves to cover potential losses, eating into their profit.
Sharing the same viewpoint, experts from MB Securities Joint Stock Company (MBS)said that the bad debt ratio was said to peak in the third quarter of thisyear, and the banking system’s provision is on a positive trend; however,pressure for provision will continue into 2024.
Updated statistics from the central bank showed that as of the end ofSeptember, total outstanding debt under circular No.02 reached some 140trillion VND (5.75 billion USD), accounting for 1.09% of the banking system’scredit value.
However, most banks recorded higher bad debt ratio in Quarter 3 than previousquarters. Total soured loans at the end of Quarter 3 surged 61% from Q2 to more than196.75 trillion VND.
MBSsaid that average bad debt ratio at state-owned commercial joint stock banksrose 0.4% from the beginning of the year, while other commercial joint stockbanks witnessed an increase of 0.7%.
Banks that had enhanced bad debt provisions in 2023 and reduced the risk-weightedassets may have ample room to handle soured loans, and have an advantage toexpand their profits, it highlighted.
Experts from the MBS forecast that credit growth in 2024 would be 13-14%, and the net interest margin (NIM) would be improved on the back of low interest rate, which is expected to push commercial banks’ after-tax profit up, at an estimated 25.1%.
Vietcombank Securities Co.,Ltd expected banks’ profit will grow some 10%;however, several small-scale banks will experience a fall and even suffernegative growth.
It said the banking system’s credit growth will maintain at 12%, and continuefeeling the pressure from the economy as well as the sluggish recovery of therealty market.
Meanwhile, Vietnam Investors Service and Credit Rating Agency Joint StockCompany (VIS Rating) felt upbeat about the bad debt situation next year.
The formation of bad debts will slow down thanks to improvement in the country’sbusiness climate that helps better customers’ ability to repay loans, it said,adding banks’ profitability will make a gradual recovery on the back of improved NIM and increasing credit demand spurred by a brighter economic situation.
The above-mentioned factors will contribute to consolidating the banking system’scapital scale, while liquidity will become more stable when deposit growth ratekeeps pace with credit growth rate, it added./.
Sharing the same viewpoint, experts from MB Securities Joint Stock Company (MBS)said that the bad debt ratio was said to peak in the third quarter of thisyear, and the banking system’s provision is on a positive trend; however,pressure for provision will continue into 2024.
Updated statistics from the central bank showed that as of the end ofSeptember, total outstanding debt under circular No.02 reached some 140trillion VND (5.75 billion USD), accounting for 1.09% of the banking system’scredit value.
However, most banks recorded higher bad debt ratio in Quarter 3 than previousquarters. Total soured loans at the end of Quarter 3 surged 61% from Q2 to more than196.75 trillion VND.
MBSsaid that average bad debt ratio at state-owned commercial joint stock banksrose 0.4% from the beginning of the year, while other commercial joint stockbanks witnessed an increase of 0.7%.
Banks that had enhanced bad debt provisions in 2023 and reduced the risk-weightedassets may have ample room to handle soured loans, and have an advantage toexpand their profits, it highlighted.
Experts from the MBS forecast that credit growth in 2024 would be 13-14%, and the net interest margin (NIM) would be improved on the back of low interest rate, which is expected to push commercial banks’ after-tax profit up, at an estimated 25.1%.
Vietcombank Securities Co.,Ltd expected banks’ profit will grow some 10%;however, several small-scale banks will experience a fall and even suffernegative growth.
It said the banking system’s credit growth will maintain at 12%, and continuefeeling the pressure from the economy as well as the sluggish recovery of therealty market.
Meanwhile, Vietnam Investors Service and Credit Rating Agency Joint StockCompany (VIS Rating) felt upbeat about the bad debt situation next year.
The formation of bad debts will slow down thanks to improvement in the country’sbusiness climate that helps better customers’ ability to repay loans, it said,adding banks’ profitability will make a gradual recovery on the back of improved NIM and increasing credit demand spurred by a brighter economic situation.
The above-mentioned factors will contribute to consolidating the banking system’scapital scale, while liquidity will become more stable when deposit growth ratekeeps pace with credit growth rate, it added./.
VNA
