Non-performing loans in Ho Chi Minh City reached VND46.4 trillion (US$2.2 billion) in late May or 4.84 percent of total outstanding loans.
Soured loans jumped 3.38 percent compared to late 2013, according to a report recently sent by the municipal People’s Committee to the central bank.
Worse still, around 70 percent of the bad credit is held by borrowers who can't repay their loans, according to the report.
Foreign-owned lenders recorded the lowest ratio of soured loans--2.9 percent of total credit. This ratio was 4.9 percent among private Vietnamese banks and 4.4 percent at state banks.
A state bank in Ho Chi Minh City. Photo: Diep Duc Minh
Although the collateral held on non-performing loans far exceeds the troubled loans; selling the roughly VND83 trillion ($3.9 billion) in property won't be easy in a stagnant real estate market, according to the report.
Bad debts continue to weigh on Vietnam’s economic growth as banks struggle to find qualified loan candidates.
Vietnam sets a credit growth target of 12 percent this year. However, lending was up only 3.52 percent in the first half of 2014.
The government expects the economy to grow 5.8 percent this year, higher than a World Bank estimate of 5.4 percent, and a seventh straight year of growth below 7 percent.