Banks actively sell secured assets but still find it difficult to "close orders"

Banks still have a "headache" selling collateral to handle bad debts. Source: Internet.

Surveying the websites of many banks, debt sale, and debt auction announcements appear regularly. Many banks are facing difficulty selling collateral to recover debt, even though the price has been reduced to very low compared to the value of the loan; The property has been put up for sale dozens of times but still has not been sold.

Recently, Vietnam Bank for Agriculture and Rural Development Debt Management and Asset Exploitation Company Limited (Agribank AMC) announced the auction of 2,149.11 SJC gold tael debt of an individual customer. This is the entire debt at Agribank Ho Chi Minh City Branch under 2 credit contracts from 2004 and 2005 between the Jewelry Company of Ho Chi Minh City Bank for Agriculture and Rural Development (merged as is with Agribank) and Ms. D.T.N.

The book value of the temporary debt as of July 13, 2023, is 2,149.11 SJC gold taels, equivalent to more than 14.13 billion VND (according to the gold exchange rate on July 13, 2023, it is 6.66 million VND/tael). Security assets related to the debt are houses and land in Thu Duc City. Agribank AMC offers a starting price for the debt auction of VND 9,226 billion, excluding taxes, fees, and other financial obligations according to the provisions of law.

According to the announcement, debt securities are auctioned in their original state (including debt, legal status, and potential risks) and according to the "as is the case" method as the auction participants have seen/assessed. In particular, regarding potential risks, the notice said that, using unofficial and unverified information, the debt holder assessed the possibility of potential legal risks related to the auctioned debt, such as disputes between secured property owners and other individuals and organizations, these disputes are likely to have been accepted by a competent court and concluded with a criminal judgment.

Perhaps with these risks, the above debt has been offered for sale many times but has not found a buyer. The bank had to lower the price many times, for example, nearly a year ago, the starting price of the debt was 14.13 billion VND, and by the end of January 2024 it was reduced to 10.8 billion VND... Before that, Agribank also sold debt of thousands of gold taels and other credit loans at a starting price of 45 billion VND, half the original price.

In addition, real estate is the type of collateral that banks are offering for sale the most, but after many price reductions, they still cannot find a new "owner". Recently, the BIDV Binh Tan branch announced to sale of many land plots in Dong Nai, Ba Ria-Vung Tau, and Ho Chi Minh City with prices ranging from several billion VND. Including 2 plots of land in Ho Chi Minh City that have been advertised for sale 11 times before but still have no buyers, along with many plots of land in Dong Nai and Ba Ria - Vung Tau that has also been advertised for sale many times but no one has “closed the order”.

At the end of May 2024, Debt Management and Asset Exploitation Company Limited - Military Commercial Joint Stock Bank (MBAMC) offered to sell the principal and interest debt of Thien Nam Import-Export and Trading Joint Stock Company (Thien Nam). Nam Group) with a total outstanding debt of nearly 18 billion VND, collateral assets are 8 plots of land in Da Nang City and Ho Chi Minh City. Previously, MBAMC also offered to sell principal and interest debt of more than 378.2 billion VND of Quan Minh Co., Ltd. with collateral assets being land use rights, mineral exploitation rights, and factories...

According to statistics from the financial statements of 28 banks, total bad debt is 224,146 billion VND, an increase of more than 14% compared to the end of 2023 with 26/28 banks having increased bad debt balances. In particular, many banks recorded a sharp increase in group 5 debt (debt with potential loss of capital). Experts from SSI Securities Company believe that pressure on bad debt at banks will continue to increase in 2024 as the economy recovers slowly. It can take the banking system about 2-3 years to make enough necessary provisions and write off bad debts.

This situation forces banks to continuously sell secured assets at attractive discounts to recover debt, but the results of successful implementation are still very limit ed, especially when the real estate market has not recovered.

According to many assessments, the State Bank's (SBV) extension of Circular 02/2023/TT-NHNN until the end of 2024 on restructuring debt repayment terms and maintaining the same debt group has met the wishes of most people. Banks, especially in the context of slow economic recovery and weak credit demand, create conditions for businesses to repay debt, while banks avoid the risk of increased bad debt.