Vietnam Banks Accelerate Debt Auctions to Clear Balance Sheets

The Vietnamese banking system has entered 2026 with a large-scale debt resolution campaign, as lenders move to auction off hundreds of billions of dong in non-performing loans (NPLs) to clear balance sheets and support a 15% credit growth target [1]. Despite a sector-wide NPL ratio of 1.85% in the fourth quarter of 2025—the lowest level in 12 quarters—the industry faces a sharp divergence in asset quality as some institutions struggle with rising bad debt [2].

The shift in asset quality

While the aggregate NPL ratio fell 4.2% compared to the previous quarter, the underlying data reveals a split between the "Big 4" state-owned banks and smaller commercial lenders [2]. State-run institutions like Vietcombank and VietinBank maintain high loan loss coverage ratios (LLR) of 160% and 260%, respectively, providing a significant buffer against potential defaults [1]. Conversely, some banks focused on retail lending have seen NPLs rise faster than credit growth, with HDBank’s coverage ratio dropping below 55% [2].

Total NPLs in the "Group 3-5" category across 27 listed banks reached nearly 262,491 billion VND, a 14.1% increase year-over-year [3]. Within this, loans classified as "likely to lose capital" (Group 5) surged 25.9%, now accounting for over 63.5% of total bad debt [3]. Analysts note that while some banks have aggressively increased provisions, the concentration of debt in the highest-risk category continues to pressure system liquidity [3].

Strategic debt disposal

Banks are increasingly willing to sacrifice interest income to recover principal, a move intended to free up capital for new lending [2]. VietinBank’s Ba Dinh branch, for instance, recently set the starting price for an auction of a 356 billion VND debt obligation at 280 billion VND—the exact value of the principal—effectively waiving all accrued interest and penalties after six failed auction attempts [1].

Similar efforts are underway at BIDV and Agribank, which are auctioning large-scale debts backed by industrial real estate and manufacturing assets [2]. By offloading these assets, banks aim to improve their Capital Adequacy Ratios (CAR), which is essential for meeting the 15% credit expansion goal set for 2026 [2]. Major lenders have also proactively reduced their exposure to high-risk sectors; for example, VPBank lowered its real estate credit growth from over 55% in 2022 to approximately 20% by the end of 2025 [1].

What to watch

• Auction Success Rates: Monitor whether the current wave of "principal-only" auctions successfully clears stagnant assets or if further price discounts are required to attract buyers.
• Retail Segment Performance: Watch for further adjustments in retail lending portfolios, as banks continue to rebalance away from high-risk individual borrowers who have shown slow income recovery.
• Provisioning Trends: Observe whether banks continue to prioritize general provisions over specific provisions, which would indicate a cautious outlook on the broader economic recovery.

The industry's ability to maintain a stable NPL ratio while pursuing aggressive credit growth will depend on the effectiveness of these asset-clearing efforts. Whether the current "cautious optimism" holds depends largely on the performance of the smaller, retail-heavy banks that remain most exposed to the recent rise in high-risk debt.