Business

Bank bad debts forecast to remain under great pressure in 2024

Though the asset quality of banks in Vietnam will be temporarily under control until the end of 2023, experts said more attention should be paid to the issue in 2024 as bad debts are rising.
Bank bad debts forecast to remain under great pressure in 2024 ảnh 1A bank teller counts cash at a transaction office in Hanoi. (Photo: VNA)
Hanoi (VNS/VNA) - Though the asset quality of banksin Vietnam will be temporarily under control until the end of 2023, expertssaid more attention should be paid to the issue in 2024 as bad debts arerising.

The experts made the recommendation because, while existing bad debts have notbeen resolved yet, new bad debts are estimated to surge when Circular02/2023/TT-NHNN on debt restructuring and debt repayment postponement expiresin June 2024.

According to statistics, most banks are facing rapidly increasing bad debt.Total bad debt at the end of the third quarter of 2023 of banks increased by 61%compared to the end of the previous quarter to 196.75 trillion VND. If includingbad debts sold to the Vietnam Asset Management Company (VAMC), the bad debtratio of the entire banking system was 6.16%.

Nguyen Manh Thuat from Southeast Asia Law Firm said it wasnecessary to reduce the bad debt rising pressure for banks in the near future.

The most important thing was to monitor cash flow to ensure it was usedfor the right purpose. In addition to having collateral assets, it wasnecessary to control the purpose of the loan to ensure capital safety, Thuatsuggested.

Banks say about 70% of assets, which are mortgaged at banks for loans,currently are real estate. The ratio at some banks is even up to 80-90%.Therefore, real estate is often the asset that banks put up for sale the mostto recover bad debts. However, the handling of bad debt is facing difficultiesbecause the real estate market is frozen.

Nguyen Hung, General Director of TPBank, said the sale of mortgaged assets hadbeen very difficult in recent times. It was tough for banks to sell many collateralsthat were large-value real estate.

Dr Tran Duc Thuc from HCM City University warned that provisions for riskydebts were still increasing. It meant, despite support, banks' bad debts werestill increasing. It showed the economy was facing difficulties.

According to Thuc, many people predict that bad debt will increase in early2024 when corporate bonds come to maturity. The sale of assets is facingdifficulty so firms do not have money to pay bonds and bank loans. If banks donot consider an extension for existing debts, the debts will be transferred toa worse debt group.

Economist Nguyen Minh Phong believes that bad debts will still be under greatpressure in 2024 as the debts are continuously increasing and create an overallquite large bad debt amount.

According to the Governor of the State Bank of Vietnam, Nguyen Thi Hong, theSBV will consider a proposal to extend Circular 02/2023/TT-NHNN on debtrestructuring and debt repayment postponement until June 2025 to both givebanks more time to deal with bad debts and support firms in accessing capital./.
VNA
#bad debts #Vietnam Asset Management Company #banking system #real estate #corporate bonds #State Bank of Vietnam #updated Vietnam news #Vietnamplus #Vietnam News Agency
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