Bad debt still a headache for banks in 2024

May 22nd at 07:46
22-05-2024 07:46:45+07:00

Bad debt still a headache for banks in 2024

Bad debt has returned to become a headache for the banking industry this year as it increased again in Q1 2024 after declining in Q4 2023 for the first time in eight consecutive quarters.

A bank teller counts money at a transaction office in Hà Nội. Financial statements from 28 banks that have so far announced their Q1 results show collective bad debt reached more than VNĐ224.14 trillion to the end of March 2024, up more than 14 per cent against the end of 2023. — Photo baodautu.vn

According to financial statements from 28 banks that have so far reported Q1 financial statements, their total bad debt reached more than VNĐ224.14 trillion to the end of March 2024, up more than 14 per cent against the end of 2023.

Among the banks, MB had the highest bad debt increase of 56 per cent, equivalent to nearly VNĐ5.49 trillion. BIDV followed with a rise of 20.7 per cent, equivalent to more than VNĐ4.63 trillion, baodautu.vn reported.

Only two banks VPBank and SHB saw loan improvement, with bad debt ratios declining by nearly 1 per cent and 0.1 per cent, respectively.

In an analysis report released recently, the Saigon Securities Incorporation (SSI) forecast the bad debt ratio may increase again in the first half of 2024, as credit growth slows and macro-economic factors show no clear signs of improvement.

SSI’s analysts expect the bad debt ratio at the end of 2024 will increase slightly compared to 2023 as it is expected that banks will promote bad debt write-off and the economy will recover stronger at the end of the year.

While bad debt has continued to increase, banks' loan loss ratio (LLR) has tended to decline. After recovering slightly in the last quarter of last year, the LLR of banks in the first quarter of 2024 decreased by more than 7 per cent to 87 per cent, the lowest level since the end of the third quarter of 2023. Leading banks such as Vietcombank, BIDV, VietinBank and MB were in the group of banks which reported the biggest declines in LLR.

Specifically the financial reporting showed by the end of the first quarter of 2024, only five banks had a LLR of more than 100 per cent. Meanwhile, by the end of 2023, up to ten banks reported a LLR of more than 100 per cent, of which four banks had a LLR exceeding 200 per cent.

SSI’s analysts expect it may take the banking system around two to three years to make the necessary bad debt provisions and write off the bad debts. Banks with better asset quality such as ACB, Vietcombank, VietinBank and BIDV will recover sooner and vice versa.

The State Bank of Việt Nam has recently proposed extending Circular 02/2022/TT-NHNN, which allows commercial banks to reschedule the debt repayment period and maintain the debt group for certain sectors, to the end of the year, rather than finishing it in June, in order to reduce debt pressure on companies.

As credit growth remains slow and macro factors show no signs of clear improvement, it is estimated if Circular 02 expired in June 2024, the pressure to repay debts would be huge and those debts could become bad debts.

However, experts also believe that while the support policy is necessary, it should not be over extended as the market must be allowed to operate in accordance with commercial laws and principles to avoid affecting the quality of the banks' assets. 

Bizhub





RELATED STOCK CODE (3)

NEWS SAME CATEGORY

VN urged to review FDI enterprises and align investment incentives with Global Minimum Tax regulations

Experts have raised the importance of reviewing affected FDI enterprises, assessing tax collection capacity and aligning investment incentives with Global Minimum...

Central bank works on legal framework for credit scoring

The State Bank of Vietnam (SBV) has proposed using credit scoring to better manage the banking sector and promote the development of finance and fintech companies.

Standard Chartered wins multiple awards at The Asset Triple A Treasurise Awards 2024

Standard Chartered has been named best service provider for cash management in Việt Nam, best payments and collections solution for Generali Vietnam, best supply...

Banks promote online lending services

Banks are strongly stepping up online lending services via digital channels as this method saves time and costs for both the borrower and the lender.

Rising middle class pushes wealth management potential in Việt Nam

The personal financial assets market in Việt Nam is forecast to reach hundreds of billions of US dollars in the next few years, providing significant opportunities...

Proposal to amend personal income tax law set for October next year

The Personal Income Tax Law will be revised in 2025, following the proposed timeline submitted to the Government and reported to the National Assembly (NA) Standing...

Capital increase regulation proposed to ensure safety for credit institutions

Credit institutions, which have a bad debt ratio of the total outstanding loan of more than 3 per cent, will not be allowed to increase capital for their...

Policies need to be amended to promote microfinance

Microfinance has made remarkable developments and contributed significantly to poverty reduction and financial inclusion promotion in Việt Nam, but some policies...

OCB launches news OMNI 4.0 app

Orient Commercial Joint Stock Bank (OCB), a prominent private bank in Việt Nam, unveiled the OMNI 4.0 app in HCM City, showcasing modern and convenient digital...

Debt repayment help for struggling companies to be extended until year end

The State Bank of Việt Nam (SBV)’s proposal to extend Circular 02/2022/TT-NHNN will reduce pressure on enterprises which are struggling to service their debts.

Bank stocks

Insurance stocks


MOST READ


Back To Top