Banks step up debt recovery to support earnings

Banks step up debt recovery to support earnings

Banks are accelerating debt recovery and collateral liquidation efforts, helping stabilise non-performing loans and support profit growth amid narrowing net interest margins and improving credit conditions.

Since the final months of 2025, banks have been racing to auction off collateralised assets to recover debts ranging from several millions to tens of millions of US dollars.

These liquidation activities help resolve bad debts while also significantly boosting banks’ non-interest income.

Accordingly, Agribank’s Branch 9 has announced the auction of three mortgaged real estate properties in Ho Chi Minh City with a combined starting price of $8.8 million.

The branch is also offering for sale 17 land-use rights in Minh Thanh commune, Ho Chi Minh City (formerly part of Binh Duong province), covering a total area of more than 132 hectares, with a starting price of nearly $27.6 million.

In addition, the branch is auctioning two debt packages related to FLC Group, secured by real estate assets, with a combined starting price of over $8 million.

BIDV’s Hoc Mon Branch has also put up for auction land-use rights and assets attached to land at 90B national highway 22, Trung My Tay ward, with a starting price of nearly $6 million.

Meanwhile, VietinBank is seeking buyers for land-use rights in Zone C of the An Van Duong new urban area, My Thuong ward, Hue city, with a starting price of more than $9 million. A number of other NPL-related assets linked to SHC Vietnam Service and Trading Investment JSC are also being offered for sale by the bank.

VPBank has announced the auction of a fuel service rest stop in Thanh Lam commune, Ninh Binh province, including a 10-storey building, a fuel station, and a three-storey service and operations building, with a price offer of nearly $1.64 million.

Sacombank has likewise continued to announce auctions of debt packages worth tens of millions of US dollars involving firms such as Sai Gon TPP Investment JSC, Ngoc Suong JSC, and Kim Kim Hoan My Trading Service Co., Ltd., with collateral mainly consisting of real estate assets.

The market for secured asset sales has become increasingly vibrant since the final months of 2025 as banks accelerate the liquidation of assets ranging from real estate to corporate debt portfolios.

The list of liquidated assets spans land-use rights, urban housing, commercial business facilities, and corporate receivables, reflecting banks’ determined efforts to tackle bad debts at the year-end period.

According to HDBank’s leadership, in the first nine months of 2025, the bank sold more than $1.48 billion worth of debt to another bank under the State Bank of Vietnam’s credit institution restructuring scheme.

The bank’s executives noted that non-performing loan (NPL) conditions have improved more clearly from late 2025 thanks to a stable macroeconomic environment, recovering liquidity in the real estate market, and more flexible regulations on collateral handling. The bank is targeting an NPL ratio of around 2 per cent by the end of 2026.

In the first three quarters of 2025, VietinBank’s recovery of previously written-off debts reached its highest level in many years, totalling approximately $272 million, up nearly 13 per cent on-year. This year, the bank has set a target to recover $320–400 million in bad debts.

VietinBank said that while formulating its 2026 business plan, the management expects to continue recording substantial income from debt recovery, with prospects even more favourable than in 2025.

At MB, off-balance-sheet debt recovery also remained positive, reaching nearly $36 million in the third quarter last year alone, up 72 per cent on-year.

Meanwhile, at ABBank, net income from other activities amounted to $70.36 million, 13.5 times higher than the same period last year, mainly driven by the recovery of resolved debts and reversals of risk provisions.

Analysts believe that one of the key drivers behind improving NPL ratios in the banking sector is legal reform, particularly the codification of National Assembly’s Resolution 42, which helps curb the formation of new bad debts and accelerate debt recovery.

In addition, the resolution of legal obstructions for major real estate projects has helped unlock corporate cash flows, indirectly supporting asset quality across the sector.

Yuanta Securities’ analyst team pointed out that banking sector NPLs are expected to decline towards year-end due to three main factors: first, the recovery cycle of the real estate market; second, the formal incorporation of Resolution 42/2017/QH14 on bad debt resolution into law; and third, the acceleration of public investment disbursement. As a result, banks’ asset quality is projected to continue improving in the period ahead.

According to the financial statements of listed banks, on-balance-sheet NPLs amounted to approximately $10.96 billion last third quarter, up $280 million from the preceding quarter. Nevertheless, the sector-wide NPL ratio edged down slightly from 2.04 per cent in the second quarter of 2025 to 2.01 per cent in the third.

Analysts at Rong Viet Securities (VDSC) noted that banking sector’s NPLs in the final quarter last year are expected to decline slightly and remain stable, supported by a strong recovery in credit growth.

As of December 24, total outstanding credit reached $736 billion, up almost 18 per cent compared to end of 2024, and is projected to rise to 19-20 per cent by the year-end.

At the same time, profitability has continued to expand, with sector profits rising 25 per cent in the third quarter. In addition, high loan loss coverage ratios indicate that banks are well-prepared for potential risks.

VDSC also assessed that banks have continued to step up provisioning, with total provisions estimated at $1.36 billion, helping lift the industry-wide loan loss reserve coverage ratio to 96 per cent in the third quarter, an improvement from 91 per cent in the second quarter last year.

Against the backdrop of narrowing net interest margins, debt recovery and bad debt resolution have made a meaningful contribution to profit growth at many banks.

VIR