Non-performing loans surge due to pandemic
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Most banks have seen non-performing loans rise by at least 30 percent in the first nine months as the Covid-19 pandemic hit businesses and individuals. Of 15 commercial banks that have published their third-quarter results, 14 reported a surge in non-performing loans by 30 percent or more.
State-owned VietinBank posted the highest rise of 66 percent to VND17.95 trillion ($779.36 million), followed by TPBank at 60 percent and MB Bank, 39 percent.
BIDV, the largest bank in Vietnam by an asset, saw non-performing loans rising 16 percent to VND22.5 trillion, the highest among all lenders.
Bank leaders say that the rising number of low-quality debt is unavoidable amid the Covid-19 pandemic when many businesses went into financial difficulties due to social distancing measures and dwindling demand for goods and services.
Nguyen Dinh Tung, CEO of Orient Commercial Bank (OCB), said although the value of non-performing loans has surged, the ratio of it over total debt is still under control.
But economists say that these figures will continue to worsen next year.
Economist Nguyen Tri Hieu said that a circular issued by the State Bank of Vietnam in March has allowed banks to lower or cut interest rates on loans to support borrowers amid the pandemic and allow them to delay their payback time.
Although this circular has given businesses more time to recover from Covid-19 impacts, the loans they had acquired will eventually have to be paid and those unpayable will be turned into bad debts for banks, he said.
“Banks cannot escape from losing some of their loans in the future.”
As the global situation of Covid-19 is still intense globally, Vietnamese businesses will still have financial difficulties in this and next year, and therefore the central bank should prolong its low-interest credit program to support local companies, Hieu said.
Banks, meanwhile, should increase their provisions for doubtful and bad debt to protect themselves from unavoidable risks in the future, he added.
Questions & Answers
Q.Which specific banks reported the largest percentage increases in non-performing loans?
Which specific banks reported the largest percentage increases in non-performing loans?
VietinBank saw the highest increase at 66 percent, followed by TPBank with 60 percent, and MB Bank reporting a 39 percent rise. These figures represent the surge in the first nine months.
Q.What measure did the State Bank of Vietnam introduce to support borrowers during the pandemic?
What measure did the State Bank of Vietnam introduce to support borrowers during the pandemic?
The State Bank of Vietnam issued a circular in March allowing banks to lower or cut interest rates on loans. This also permitted borrowers to delay their payback time, aiming to help businesses recover from Covid-19 impacts.
Q.Why do economists predict that non-performing loan figures will worsen next year?
Why do economists predict that non-performing loan figures will worsen next year?
Economists believe the figures will worsen because although the central bank's circular offers a grace period, the loans will eventually need to be repaid. Those that remain unpayable will become bad debts for banks.
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