According to recent financial reports from Vietnamese banks, non-performing loans (NPLs) showed an upward trend in the third quarter of 2024, including at major state-owned banks.

Specifically, by the end of Q3 2024, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)’s substandard loans, doubtful loans, and potentially irrecoverable loans totaled over 17.1 trillion dong, a significant 35.8% increase from the beginning of the year. The bank’s NPL ratio rose from less than 1% to 1.22%.

Another state-owned bank, Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), saw its NPL ratio increase from 1.13% at the beginning of the year to 1.57% by the end of Q3.

Private commercial banks’ NPL situations are equally concerning. MSB Bank’s NPL ratio reached nearly 2.88% at the end of Q3, slightly higher than 2.86% at the end of 2023, with potentially irrecoverable loans surging 66%.

Vietnam Technological and Commercial Joint Stock Bank (Techcombank)’s NPL ratio was 1.35% at the end of September 2024, higher than 1.28% at the end of June. Meanwhile, the bank’s NPL coverage ratio slightly increased to 103%.

Asia Commercial Bank (ACB)’s total NPLs reached 8.27 trillion dong by the end of Q3 2024, with potentially irrecoverable loans jumping 55% to 6.06 trillion dong from the beginning of the year. The bank’s NPL ratio rose from 1.22% to 1.5% by the end of September.

Petrolimex Group Commercial Joint Stock Bank (PGBank)’s NPLs reached 1.17 trillion dong by the end of Q3 2024, up 16.6% from the beginning of the year, with the NPL ratio rising from 2.85% to 3.19%.

Similarly, LienVietPostBank (LPBank)’s NPLs grew 70% from nearly 3.69 trillion dong to over 6.27 trillion dong, with an NPL ratio of 1.96%.

The State Bank of Vietnam attributes the increase in banking system NPLs to adverse macroeconomic factors and natural disasters. Particularly after Typhoon Yakai, NPLs showed an upward trend, presenting a challenge for the banking sector that requires future solutions.

Notably, Vietnam’s economy is still recovering from the COVID-19 pandemic and global economic crisis. Despite various support policies from the government, recovery remains slow, with many enterprises still facing difficulties in resuming production and business activities.

Although NPLs have increased, they are expected to moderate as macroeconomic factors support the NPL resolution process. Specifically, the newly revised Land Law, Housing Law, and Real Estate Business Law, effective August 2024, will promote real estate market development, helping banks dispose of real estate collateral and recover NPLs.

Furthermore, under the revised Law on Credit Institutions implemented from August 1, 2024, banks will be allowed to transfer all or part of real estate projects used as collateral to recover debts. The law also allows expansion of bad debt trading subjects and scope, including purchasing debts from credit institutions and foreign bank branches, which will help thoroughly resolve NPLs at multiple banks.

Summary:

• Multiple Vietnamese banks’ NPL ratios increased in Q3 2024.
• Macroeconomic factors and natural disasters are main causes of NPL increase.
• Implementation of revised laws expected to aid NPL resolution.
• Banks gain more legal tools for NPL disposal.
• NPL growth rate expected to moderate in future.