Vietnamese banks continue shedding bad debt in June

Non-performing loan ratio has fallen to 6.7%.

The non-performing loan ratio of the Vietnamese banking sector dropped to 6.7% in June as local lenders along with credit institutions continue to make headway in stressed asset disposal, reports Viet Nam News. 

The headline figure, which is inclusive of bad loans held by both credit institutions and the Vietnam Asset Management Company (VAMC), represents a massive improvement from double digit bad loan ratio of 17.2% recorded in 2012.

Credit institutions (CIs) handled $5.96b (VND138.29t) of bad debt in June, according to local media reports. 

The risk management capacity of Vietnamese banks have steadily improved, observed analysts at the Bank for Investment and Development of Vietnam (BIDV), as lenders worked double time to meet Basel II norms by 2020 in compliance with the central bank’s master development plan to revamp the banking sector.

The government targets to have three to five banks listed on foreign stock exchange markets within seven years and have at least two or three local lenders within Asia’s top 100 largest banks by assets by 2025.

Also read: Can Vietnamese banks plug their massive capital shortage ahead of Basel II? 

Liquidity at banks has been also held steady in the past five years, with the loan-to-deposit ratio (LDR) declining from 98% in 2011 to 87% in 2017. Additionally, confidence in domestic banks have brightened as credit rating agencies like Fitch and Moody’s upgraded the ratings for a total of 12 Vietnamese banks in May and August.