Vietnamese banks report Jan-Sept rise in bad debts

Experts blame this on recent credit growth, loose lending practices and accumulated old non-performing loans.

Bad debts of VietinBank, the country’s second largest lender by assets, rose by 34.5 percent to nearly VND12.13 trillion ($519.82 million) in the first 9 months of this year.

Group 5 debt, the worst category for potential loan losses, accounted for the largest proportion at 72 percent of the bank’s total bad debts. Group 5 debt was also the category with the biggest increase in the last 9 months, rising 68 percent to nearly VND8.74 trillion ($374.57 million).

At BIDV, Vietnam's biggest bank by assets, bad debts had totaled VND17 trillion ($728.65 million), a 21.1 percent increase over late 2017. However the bank’s bad debt ratio stood at 1.76 percent, well below the 3 percent danger limit set by the State Bank of Vietnam.

The bad debt ratio of VPBank, meanwhile, rose to 4.7 percent by Q3, compared to 2017’s year-end figure of 3.39 percent. At the end of Q3, VPBank’s bad debt had increased by 52 percent compared to the beginning of the year, reaching VND9.4 trillion ($402.9 million)

At Techcombank, total bad debt rose 33 percent between January and September, with Group 5 bad debt rising by 31 percent. Overall, the bad debt ratio on the bank’s loans rose to 2.05 percent from 1.61 percent at the beginning of the year. The bank's bad debt is currently at VND3.43 trillion ($146.82 million).

Banking expert Nguyen Tri Hieu said that the increase in bad debt was related to credit growth. New bad debt rises as banks increase lending and adopt looser lending practices, he said.

The country’s credit growth in the first nine months of this year was 9.52 percent.

Pham Hong Hai, CEO of HSBC Vietnam, said that from 2019 onwards, bad debt may re-emerge as a problem for banks after the recent credit growth and instability in global financial markets.

State Bank of Vietnam Governor Le Minh Hung said recently that bad debts and potential bad debts of the sector amounted to 8.61 percent of total credit by the end of September.

Vietnam’s banking sector posted an estimated 18.17 percent credit growth in 2017, according to the Ministry of Finance. It has targeted a credit growth of 17 percent this year.