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Update on Banking Sector’s Asset Quality in 1Q25

• On-balance sheet non-performing loans (NPLs) from customer loans at 27 listed banks increased by over VND 37 trillion in 1Q25, following a reduction of more than VND 25 trillion in the prior quarter, representing a 16% QoQ increase. As a result, the total on-balance sheet NPLs at the end of 1Q25 rose to over VND 265 trillion, corresponding to an NPL ratio of 2.16%, compared to 1.92% at the end of 2024.
• Net NPL formation (before write-offs) in 1Q25 reached VND 64.5 trillion, a significant increase from approximately VND 11 trillion in the previous quarter. Of this, net NPL formation for the banking group (excluding consumer finance companies) amounted to VND 57.5 trillion, with a high concentration among four banks—BID, CTG, VPB, and MBB—accounting for 69% of the total net NPL formation.
• NPLs are expected to continue rising in the upcoming quarter, driven by the strong net increase in Group 2 loans, estimated to be equivalent to the net NPL formation in 1Q25, with significant latent NPL risks remaining. However, the scale of new NPLs will vary between state-owned banks and joint-stock commercial banks, as the substantial NPLs incurred by BID and CTG in 1Q25 have passed probation period and returned to the standard loan category.
• Specific credit risk provisioning expenses amounted to nearly VND 29 trillion, representing only 45% of the net NPL formation. Consequently, the industry’s loan loss reserve (LLR) coverage ratio declined to 92% at the end of 1Q25 from 110% in the prior quarter. The LLR coverage ratio for state-owned banks remained above 100%, at 132% (4Q24: 167%), while that of joint-stock commercial banks (JSCBs) further deteriorated to 56% (4Q24: 62%). The low LLR coverage ratio for JSCBs will increase pressure to bolster provisions to address both existing on-balance sheet NPLs (with a high proportion of Group 3 and 4 loans) and newly arising NPLs to manage the NPL ratio effectively.