Of 29 of Vietnam’s biggest banks, 27 had recorded an increase in bad debt at the end of June, Mekong ASEAN has reported. Between them there was VND 46,719 billion or US$1.86 billion in bad debts, an increase of 20.8 percent compared to the end of 2023.
Of note, back in December banks went on a lending frenzy as they tried to make up for lacklustre credit growth throughout 2023 by cramming it all in at the end of the year. This saw very aggressive marketing campaigns take place and this led credit to grow by 4.35 percent in December as opposed to the average of 0.83 percent a month over the other 11 months of the year.
With demand for business credit very low, it was apparent that the bulk of the loans issued in December were to consumers. More lending, particularly to consumers, by default should mean more bad debt. That said, it will be interesting to see how much of this debt stems from that aforementioned lending frenzy back in December.
Furthermore, to drive lending the State Bank has eased lending criteria. Specifically, pursuant to amendments to Circular 39 made in June, loan applications for less than VND 100 million or about US$4,000 no longer need to detail a plan for the borrowed funds.
Also, revised regulations on restructuring bad debt that were set to end at the end of June have been extended. These give banks more freedom to postpone repayments on outstanding debts until the end of the year. At this stage, however, it looks very much like this is simply kicking the can down the road.