COVID-19 pandemic causes bad debts to surge

Hanoi (VNS/VNA) - Non-performing loans (NPLs) among commercial banks increased sharply in the first three quarters of this year due to the adverse impacts of the COVID-19 pandemic.

A report from Viet Dragon Securities Co showed that NPLs at 17 banks had jumped by 31 percent at the end of the third quarter against the end of last year to 97.28 trillion VND (4.19 billion USD). The amount accounted for 1.8 percent of the banks’ total assets.

Specifically, Vietcombank's NPLs rose by 36 percent compared to the beginning of the year to nearly 7.88 trillion VND. Of which, sub-standard debts surged by 4.2 times to 2.92 trillion VND, and doubtful debts grew by nearly three times. The ratio of NPLs over total outstanding loans increased from 0.79 percent at the end of 2019 to 1.01 percent.

VietinBank reported that NPLs had gone up 66 percent to 17.94 trillion VND, lifting the bank’s bad debt ratio from 1.16 percent to 1.87 percent.

TPBank had bad debt of 59 percent at 1.97 trillion VND, accounting for 1.79 percent of its total outstanding loan balance.

Sacombank’s bad debts also edged up 19 percent to nearly 6.84 trillion VND.

ACB's bad debts at the end of September were 2.48 trillion VND, up 71 percent from the beginning of this year. ACB's ratio of NPLs over total outstanding loan balance also increased from 0.54 percent to 0.84 percent.

MBBank's bad debts rose by more than 39 percent to 4.03 trillion VND, causing the ratio of NPLs over total outstanding loan balance to increase from 1.16 percent to 1.5 percent.

Many small commercial banks have also seen their bad debts increasing sharply.

Kienlongbank’s bad debts jumped to 2.24 trillion VND, 6.5 times higher compared to the beginning of this year, while debts at VietBank rose by 61 percent to 867 billion VND, dragging its bad debt ratio from 1.32 percent to 2.03 percent.

MSB's bad debts surged by 31 percent to 1.70 trillion VND, while LienVietPostBank had a total bad debt of 2.61 trillion VND by the end of the third quarter of this year, up 29 percent.

Can Van Luc, a member of the National Advisory Council on Financial and Monetary Policies, attributed the surge in bad debt to the impacts of the COVID-19 pandemic, which had caused a reduction in revenue making it difficult for borrowers to repay their loans.

If the pandemic continues to cause difficulties for enterprises, international trade, and services, bad debts of the banking system will probably increase in the coming time, Luc said.

Banking expert Nguyen Tri Hieu said the sharp increase in bad debts in the first nine months of this year was not surprising in the wake of the pandemic, and was a global issue.

Hieu noted the bad debt situation this year was clearly worse than that in 2019 and would continue to increase, so banks should be cautious./.