The COVID-19 crisis is taking a toll on the banking industry. As businesses hit rock bottom, default loan repayments contribute to increased bad debt ratio in major financing institutions.
2020’s 1st-half performance reports from various banking institutions such as BIDV, Vietcombank and Vietinbank show a rise in the rate of bad loans.
The number of bad loans in Vietcombank went up more than 10 percent in 2020’s 1st-half. As a result, the bad loan ratio increased to 0.83% from 0.79%. Doubtful loans (or NPL) skyrocketed 56% while subprime debts went up 58 percent.
By the close of June, bad debts had accumulated 17% over the start of 2020, where doubtful and subprime debts went up 21 percent and 11 percent, respectively. Overall, the bad loan ratio for Vietcombank jumped to 2% from 1.75%.
Meanwhile, in Vietinbank, the ratio of bad debt to unsettled loans jumped to 1.7% from 1.16%.
But large banks are not the only ones feeling the heat of these difficult economic times. Smaller players like Sacombank, Asia Commercial Bank, Eximbank and Orient Commercial Joint Stock Board are experiencing the same.
In the close of June, Sacombank’s also experienced a rise in bad loan ratio from 1.94% to 2.15%. Meanwhile, the figure stood at 1.93% in Orient Commercial Joint Stock Bank (OCB), a slight uptick from 1.84% recorded at the start of 2020.
Eximbank’s bad credit counts skyrocketed 12% to hit 2.16 trillion VND in the dying embers of June, raising the ratio to 2.08% from 1.71%.
The Coronavirus crisis has led to unprecedented changes in the business environment, causing a surge in non-performing loans in many banks. However, financial institution have postponed debts for borrowers plagued by the global crisis until the end of Sept 2020 as mandated by the State Bank of Vietnam (SBV).
The Bottom Line
The central bank has cautioned that bad debt ratio for the entire sector will probably increase 3 to 4 percent in 2020.
Currently, the ratio remains in check as banks have been taking control measures to reduce NPLs.
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