Banks ramp up sale of real estate collateral to recover bad debts
Many banks have recently rushed to put up real estate collateral for sale to recover bad debts, but they are finding it difficult to sell the assets despite reducing prices.
Many banks have recently rushed to put up real estate collateral for sale to recover bad debts, but they are finding it difficult to sell the assets despite reducing prices.
Agribank has recently announced the sale of two large plots of land in HCM City, which are collateral for loans from MuMuSo Vietnam Import-Export Company, Tinh Tú Import-Export Trading Service Investment Company and Toocha Vietnam Company. The land has an area of 9,500 sq.m with a starting price of VNĐ191.6 billion, news portal cafef.vn reported.
Previously, Agribank also announced the selection of an organisation to auction the bad debt belonging to Wisland Vietnam Company. The company’s loan is secured by real estate in Đà Nẵng City. Agribank has said that the book value of the company's debt as of July 24 this year was more than VNĐ52.45 billion, of which the principal debt was nearly VNĐ44.92 billion and the interest more than VNĐ7.53 billion.
At the end of August, Agribank also started auctioning off the entire debt belonging to Cườm Việt Company. The collateral for this debt includes 18 pieces of real estate in the northern province of Vĩnh Phúc. The value of the debt as of July 31 this year was nearly VNĐ123.38 billion. The bank set the starting auction price for the debt at VNĐ111 billion.
IVB Bank has recently also put up for sale a debt secured by part of an apartment building on Hồ Tùng Mậu Street, part of an apartment project in Cầu Giấy District and a townhouse on Lê Hồng Phong Street, all in Hà Nội. These are all secured assets belonging to the No 2 Electricity and Water Installation and Construction Joint Stock Company 2. According to information provided by IVB, the debt obligation of the company at this bank as of August 6 this year was VNĐ41.5 billion.
Meanwhile, Sacombank is selling many real estate products at the Xi Grand Court project in HCM City’s District 10. The auctioned assets are owned by Phú Sơn Thuận Construction Investment Joint Stock Company.
According to banking expert Dr. Nguyễn Trí Hiếu, banks have rushed to sell real estate collateral because banks' bad debts increased in the first half of this year. This is due to the slow recovery of the Vietnamese economy and particularly the real estate market. Meanwhile, 70 per cent of secured assets at banks are real estate.
When real estate liquidity is poor, it is difficult for banks to handle real estate collateral through foreclosure. In this context, if the foreclosure is successful, banks will suffer a lot of damage.
Sharing the same view, Dr. Nguyễn Quốc Hùng, General Secretary of the Vietnam Banks Association, said that the real estate market is sluggish, creating difficulties in handling real estate collateral and recovering bad debts. Therefore, banks can only handle bad debts quickly when the real estate market improves, and vice versa -- banks will not be able to handle bad debts if the real estate market remains frozen.
As the settlement of these bank bad debts continues, Hiếu said he does not expect a breakthrough in the real estate market until the end of this year. The sale of banks’ real estate collateral is therefore also unlikely to greatly improve the market. — VNS
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