Real estate collateral in 10 of Viet Nam’s commercial banks is worth more than VND4 quadrillion (US$170.2 billion), accounting for 56 per cent of the banks’ total collateral.
The ratio at some banks, such as Sacombank, ACB and Eximbank, is even higher at more than 70 per cent of the banks’ total collateral. At ACB, for example, 89 per cent of the bank’s collateral is made up of by real estate assets, valued at VND363.6 trillion.
At other banks such as Military Bank and HDBank, the ratio is lower as the banks accept other kinds of collateral for loans.
Real estate collateral at Military Bank is worth VND182.2 trillion, 30 per cent of the bank’s total collateral, while collateral using other papers makes up VND194.55 trillion.
At HDBank, collateral of other valuable papers reaches VND142.43 trillion, nearly equal to its real estate collateral of VND148 trillion.
Real estate has been preferred by banks as collateral because the asset has certificates for land use rights, which are the clearest documents to prove borrowers’ ownership, and its value usually increases in the long run.
However, due to the bubble of the real estate market a few years ago, many banks are burdened with large amounts of non-performing loans (NPLs) with real estate collateral.
Thanks to the recovery of the real estate market this year, many banks are putting the collateral of default borrowers up for auction to tackle NPLs.
For example, Sacombank plans to put 11 properties related to non-performing loans and collateral of its borrowers on auction tomorrow at a starting price of more than VND10 trillion.
With the efforts to deal with NPLs, Sacombank expects to bring down the bad debt ratio from 3.3 per cent at the end of the first quarter to 3 per cent at year-end.