Photo by Edwin Petrus via Unsplash.

Typhoon debt relief to squeeze Vietnamese banks profitability

It will delay the formation of bad loans.

Vietnamese banks’ profitability will be squeezed after recent debt relief measures to typhoon-hit borrowers, said S&P Global Ratings.

The ratings agency estimates that state-owned commercial banks (SOCBs) are offering VND360t worth of loan relief to borrowers.

This loan relief will keep non-performing loan (NPL) ratios stable, S&P said.

However, this is just a delay, and overall NPLs will likely climb when measures end– especially as Vietnamese banks are dealing with a still-recovering real estate sector.

“The loan relief packages may temporarily ease borrowers' repayment burden and keep headline nonperforming loan (NPL) ratios stable. However, this comes at a time when the country's domestic real estate sector is still recovering, and we expect overall NPLs to climb when these measures end,” S&P said in its report.

Amongst the lenders, Vietcombank is expected to manage these risks due to its strong profitability. Vietcombank is the most profitable state-owned commercial bank in Vietnam, according to S&P.

“Privately owned commercial banks are offering similar debt relief, though we expect the scale to be smaller than that of SOCBs,” S&P said.
 

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