Bad debts have gone down and the real estate market is warming up.
Successful bad debt cuts and the upbeat real estate market have given Vietnamese banks a good year as they expect net profits to increase 44 percent from 2016.
Returns on assets (ROA) and equity (ROE) in the banking sector have both reached the highest levels in five years, according to a report from the National Financial Supervisory Commission issued Tuesday.
Local banks have managed to clear VND70 trillion or more than $3 billion worth of bad debts in the past year, while the rising property market has boosted credit growth, the report said.
The commission reported an estimated 19 percent credit growth this year, and the sector’s total assets have increased 17.3 percent.
Many bank executives told VnExpress earlier that their pretax profits are going to beat the annual targets by 50-100 percent.
Some are seeing their profits surging tenfold compared to several years ago.
Bad debts in Vietnamese banks, mostly incurred due to a slowdown in the country’s real estate market in the early 2010s, have been cut to 2.34 percent of loans by the end of September 2017, down from 2.46 percent at the end of last year, according to the State Bank of Vietnam. The central bank set up an institution to deal with toxic loans, the Vietnam Asset Management Corp., in late 2013.
Credit ratings agency Moody’s in October upgraded its outlook for Vietnam’s banking system from stable to positive for the next 12-18 months, reflecting the country’s strong economic prospects and positive outlook for most rated banks.