Can Vietnam halt the exponential growth of its bad debt?

VAMC was able to resolve 27.9% of NPLs it purchased in 2017.

The Vietnam Asset Management Corporation is acting fast to put a stop to the growth of Vietnam’s ballooning bad debt, according to Maybank Kim Eng, with the organisation targetting to handle up to $6.31b (VND144t) in non-performing loans it has purchased since its establishment in 2013. 

Analysts are bullish on the asset management company’s capacity to halt the expansion of NPLs as its track record shows that from solving 3.7% of bad debt it purchased in 2014, it has solved almost a third (27.9%) in 2017, with estimates that it can solve as much as 45.5% by 2018. 

“We estimate total NPLs would have declined to 7.9% by the end of 2017 from 8.6% in Sep’17, which we expect will decrease further to 6.1% by end-2018,” Maybank Kim Eng noted, adding that that will be a positive reform for the banking sector and the equities market.

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Special Resolution 42, passed by the National Assembly has also helped in reducing the bottleneck in dealing with seized assets in local courts. “This is likely to act as a positive factor in 2018. Various banks, such as VP Bank, HD Bank, and Tien Phong Bank have been able to re-capitalise with participation from both foreign and domestic investors.”

In fact, credit rating agency Moody’s upgraded Vietnam’s banking sector outlook from stable to positive possibly stemming from lower bank NPLs.