A view of a residential area in Hanoi. Real estate is always the preferred asset to secure loans at banks. (Photo: VNA)According to the audited consolidated financial statements for 2022 of the fourbanks, Vietcombank, VietinBank, BIDV and Agribank, the value of collateral forloans at the banks exceeded 2 quadrillion VND each.
Leading is Agribank with 2.53 quadrillion VND, followed by VietinBank with 2.5 quadrillionVND, BIDV with 2.46 quadrillion VND and Vietcombank with 2.1 quadrillion VND.
In the collateral, real estate still accounted for the majority. Especially atAgribank, the collateral that is real estate reached nearly 2.29 quadrillionVND, accounting for about 91% of total collateral and increasing 13% comparedto the end of 2021.
The ratio of real estate in total collateral at the remainingthree banks also ranged high, from 68-74%.
Real estate is always the preferred asset to secure loans atbanks. According to calculations by financial data service provider FiinGroup,up to 70% of collateral for loans in the Vietnamese banking system is currentlyreal estate. The value of collateral as real estate in the banking industry isup to 16-17 quadrillion VND.
Pham Thi Hoang Anh, Deputy Director of Banking Academy, said bank collateralassets are now very diverse, from real estate to cars, motorbikes, yachts anddeposits.
However, as most Vietnamese people often think real estate is an asset thatalways maintains prices and can increase in the future, the main and mostpopular asset used to secure loans is real estate.
Banks often prefer real estate as mortgaged assets as it is easy to value andmonitor the mortgages during and after loan disbursement as the assets cannotbe moved.
In addition, the liquidity of real estate is always better than othercommodities, so the recovery of debts through a collateral settlement can beeasier.
However, as the real estate market has been slowing, it is not easy for banksto sell bad debts mortgaged with real estate to recover the debts despite bigsell-off.
For example, the debt of BBP Paper Joint Stock Company at VietinBank has beenoffered for sale for the 18th time. The debt has a temporary value as of June30, 2022, 389.2 billion VND, but the bank still found no buyer though thestarting price announced by VietinBank at the latest auction recently for thedebt was only less than 65 billion VND.
In the context that the real estate and corporate bond markets are less activethan in the past, experts believe holding real estate as collateral brings morerisks to banks.
According to FiinGroup, the banking system is facing potential bad debt risksfrom the real estate credit portfolio as the sale of the mortgaged real estateis difficult due to the slowdown of the real estate market.
Experts said it would be difficult to find investors with enough financialpotential to buy back large debts. At the same time, there remain hurdles inlegal procedures in handling collateral such as real estate./.
VNA
