Credit risk forecast in 2024

The policy of extending, postponing debt, and maintaining the same debt group for customers has been applied by the State Bank since March 2020 and has been extended to the present.

The regulations issued mainly aim to give banks a mechanism to delay recognition and provisioning, as well as create conditions to extend time for real estate investors to settle their obligations. debt is about to come due.

HIGHEST BAD DEBT RATE SINCE 2015

The latest is Circular 02/2023/TT-NHNN regulating credit institutions to restructure debt repayment terms, maintaining the same debt group for loans to finance production and business and loans to serve life needs. Living and consumption directly impact the bad debt picture of banks.

In addition to the production and business sector, Circular 02 has added permission to defer/defer debt for the consumer lending sector – an area that is also facing many difficulties in the context of declining borrowers’ income. Maintain the debt group according to the most recent debt group before restructuring and take the accrued interest out of the balance sheet for monitoring (not included in the accrued interest) until June 30, 2024.

Currently, the State Bank is considering extending the validity period of this Circular.

However, even with such mechanisms, bad debts and debts requiring attention at listed banks still increased by 53% and 42% respectively compared to the beginning of the year at the end of the third quarter of 2023.

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By the end of the third quarter of 2023, the whole industry’s bad debt (NPL) ratio was still at 2.25%, an increase of 64 basis points compared to 2022 and the highest NPL level since 2015 (VnEconomy compiled from financial statements). listed banks themselves).

In 2024, overall credit risk is forecast to increase slowly compared to 2023 (reaching 7.81%, lower than 15.6% in 2023). In particular, credit risks of some areas such as loans for agricultural, forestry and fishery development, loans for investment in the logistics service industry are forecast to decrease.

Department of Forecasting and Statistics – State Bank

Almost all banks continue to record increased NPL targets in the third quarter of 2023 compared to the beginning of the year and previous quarters. On average, state-owned joint stock commercial banks have an increase of 0.4% compared to the beginning of the year, this figure for the private commercial banks group is 0.7% (excluding NCB from statistics due to the NPL ratio is unusually high at 26.3% in the third quarter of 2023).

In addition, debt that needs attention (Group 2) and restructured debt increased by 2.38% and 1%, respectively, at the end of the third quarter of 2023. Thus, bad debt and hidden bad debt are at 5.3% of total outstanding debt as of September 30, 2023.

At the same time, the bad debt coverage ratio (LLR) also declined to the lowest level since the end of 2020, recording 93.8%. In 2022, this number is 136.9%. The bad debt coverage ratio of the state-owned commercial bank group is significantly higher than that of the joint stock commercial bank group.

BANKS LIGHTLY STRENGTHEN LOAN CONDITIONS FOR BUSINESSES

According to the results of the 2024 credit trend survey announced by the State Bank, credit institutions assess overall credit risk to continue to increase in the last 6 months of 2023 but the growth rate has slowed down compared to forecast and compared to the first 6 months of 2023. Overall assessment of 2023, the credit risk level of loans is considered to increase more strongly than in 2022 and compared to the initial forecast.

Therefore, despite the pressure of credit growth, credit institutions still slightly tighten the overall lending terms and conditions for corporate customers. Mainly requirements for collateral, additional terms in credit contracts, minimum credit rating requirements of customers,… especially for the field of business investment loans. securities trading and lending for real estate investment and business. However, credit institutions keep credit terms and conditions stable for individual customers.

Currently, most banks have not published their financial statements for the fourth quarter and the whole year of 2023. However, due to the sudden acceleration of credit growth at the end of the year, reaching over 13.71% (up 4.7% compared to 2023). with November 2023), analysts believe that the bad debt ratio will decrease in the fourth quarter of 2023. This ratio is likely to increase again in the first half of 2024 when credit growth slows down and macro factors show no clear signs of improvement. However, the bad debt ratio at the end of 2024 will not change much compared to 2023, because at the end of the year it is expected that banks will promote bad debt write-off and the economy will recover stronger.

However, problem debts (including Group 2 debts, restructured loans, overdue corporate bonds and old loans) continue to need close monitoring. In addition, if the draft amendment to Circular 16 loosening restrictions on investment in corporate bonds by banks is approved, it cannot be ruled out that part of the credit risk will return to active banks. buy back corporate bonds.

Forecasting the next 6 months, credit institutions are concerned that the overall credit risk level will continue to increase. According to the State Bank, overall credit risk is forecast at 11.9%, higher than 10.9% in the last 6 months of 2023.

AREAS FORECASTED TO BE LESS RISK IN 2024

In 2024, overall credit risk is forecast to increase slowly compared to 2023 (reaching 7.81%, lower than 15.6% in 2023). In particular, credit risks of some areas such as loans for agricultural, forestry and fishery development, loans for investment in the logistics service industry are forecast to decrease. The two areas that are forecast to have the highest credit risk continue to be real estate business investment loans and securities business investment loans.

Compared to the industrial real estate and industrial park real estate segments, residential real estate businesses account for the majority, more than 70% (according to data from WiGroup).

Residential real estate businesses show signs of deterioration in their ability to pay interest. The liquidity ratio is low compared to 2022, showing that real estate businesses are under pressure on cash flow.

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According to the State Bank, in the first 6 months of the year and the whole year 2024, 70.3-73.3% of credit institutions plan to continue to maintain or slightly relax their units’ overall credit standards.

In particular, it is expected to slightly loosen credit standards for all priority sectors and “Manufacturing and processing industry”, “Investment loans for the logistics service industry” and “Loans to buy houses for residential purposes”. .

Banks loosened their units’ credit standards thanks to the expectation of “positive macroeconomic prospects” along with “the Government’s policies to orient and manage the development of economic sectors” and ” policy orientation and credit management of the Government and the State Bank”.

Three areas are forecast by banks to be the driving force for credit growth in 2024: wholesale and retail; export and import; food and beverage production…

The content of the article was published in Vietnam Economic Journal No. 04-2024 published on January 22, 2024. Dear readers, we invite you to read here This:

https://postenp.phaha.vn/chi-tiet-toa-soan/tap-chi- Kinh-te-viet-nam

Credit risk forecast in 2024 - Photo 3

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