Vietnam banks may face challenges in paying back real estate loans: S&P

7% of Vietnam banks’ loan portfolios come from property loans.

Banks are expected to handle mortgage loans well, but there might be challenges with commercial real estate loans, comprising around 7% of Vietnam banks' loan portfolios, told S&P Global in a report.

In a worst-case scenario, sector-wide nonperforming loans (NPLs) could potentially increase to approximately 4.5%, as per S&P's preliminary calculations.

Vietnamese property developers continue to face difficulties in repaying debt due to the government's crackdown on the rapidly expanding sector in 2022. 

The resulting property downturn and price correction pose a potential risk to the banking sector. 

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However, recent interest rate cuts and forbearance measures are expected to help alleviate the impact of these challenges.

"We believe the strains will be manageable for the banks." said S&P Global Ratings analyst Ivan Tan.