VN banks struggle to sell mortgaged land to collect money for debts

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Many banks are rushing to sell land and other assets used as collateral for loans to collect debts, including properties worth trillions of dong.

VN banks struggle to sell mortgaged land to collect money for debts

Vietcombank has announced the sale of land and assets worth VND1.1 trillion of Evergreen Vietnam.

On sale are land plots with total area of 30,000 sqm, construction works on the land, and all machines of the company in the VSIP II Industrial Zone, in addition to 40,000 sqm land, construction works and machines in the VSIP IIA.

Bank branches in many localities nationwide have offered to sell real estate for debt collection. These include properties offered for sale many times.

BIDV Thua Thien – Hue, for example, has announced the foreclosure of land, houses and assets on land with a total area of 1,100 sq m on Hung Vuong Road in Hue City. This is collateral of Thanh Trang Co Ltd. The starting price is VND99 billion.

An Agribank branch in HCM City has organized an auction to sell six land-use rights and construction works on land at No 20 Tran Cao Van Street in district 1 with the starting price of VND430 billion. The total area of the land plot is 1,900 sq m.

The assets on sale are being used to pay debts incurred by Sai Gon Moi Real Estate Development Co Ltd.

In late December 2021, assets were put up for sale with the similar starting price.

VietinBank’s branch in Binh Duong Industrial Zone (IZ) has organized an auction to sell the land-use right and assets on the 7,400 sqm land area on Tan Ky Tan Quy Road in BinhTan district in HCM City at the starting price of VND230 billion. This is the collateral for the loan the bank provided to Luc Kim Quan Co Ltd.

In addition to land, banks are also offering to sell apartments for debt recovery. Agribank’s branch in HCM City is seeking buyers of a unit at the GiaiViet apartment building and commercial building at No 854-856 Ta Quan gBuu Road in district 8.

The apartment, with the floor area of 115.51 sq m, has the starting price of VND4.79 billion. Prior to that, the apartment was offered by Agribank at VND5.9 billion.

Sacombank is also offering to sell 19 apartments, including 10 penthouses belonging to Xi Grand Court project. The apartments are priced between VND3.052 billion and VND9.122 billion.

In addition to real estate, many banks are also selling luxury cars, ships, machines and shares. VIB has put up for sale a number of luxury cars priced from hundreds of million to billions of dong.

Vietcombank HCM City has auctioned 20 percent of contributed capital of PV Engineering with the starting price of VND340 billion, while Sacombank has offered to sell debt worth VND596 billion of Van Phat Real Estate and Development, mortgaged by 40 million shares of Do Thanh Real Estate JSC.

In January 2022 alone, BIDV posted 16 notices on mortgage foreclosure, Agribank 20, and Vietcombank 8.

Not easy to find buyers

Analysts say the bad debts in the banking system increased because of the fourth Covid wave.

According to SBV, the on-balance sheet NPL ratio had reached 1.9 percent as of the end of 2021, an increase of 0.21 percent over the end of 2020. Meanwhile, the bad debt ratio sold to VAMC which have not been settled and the debts likely to become bad debts were 3.79 percent. If counting in the loans restructured in accordance with Circular 01 which are likely to become bad debts, the total bad debt ratio is predicted to reach 8.2 percent.

Bad debts are expected to continue rising in the context of the complicated developments of the pandemic. As enterprises have difficulties, they cannot pay bank debts, thus increasing the bad debt ratio.

In order to collect debts, banks are rushing to sell mortgaged assets. These include assets offered for sale many times but without buyers, even after lowering the starting prices in subsequent offers.

Analysts say that it’s difficult for banks to sell mortgaged assets because of the complicated regulations on land and real estate projects, including the procedures related to mortgage lien release and asset valuation.

In many cases, the land plots are the collateral of many debts related to many institutions and individuals, so it takes time to transfer the ownership.

In general, the properties offered by banks to recover debts are worth trillions of dong. So it is difficult to find buyers who have the financial capability.

Tuan Dung

Banks have been increasing the attraction of deposits to have enough capital for the credit needs of customers. Credit demand is expected to increase from the first quarter of this year.

Though businesses need the Government’s economic recovery packages to rebound from the pandemic, the Government should consider limiting the participation of commercial banks in the packages to help them avoid bad debt risks, experts suggest.

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