Vietnam’s OCB to see loan delinquencies ease through 2026

Profitability will remain below historical levels, however.

Vietnam’s Orient Commercial Joint Stock Bank (OCB) should see its loan delinquencies ease over the next 12-18 months.

OCB’s asset quality weakened in the first six months of 2024 on the back of more bad loans from its retail borrowers. Its gross non-performing loans (NPL) ratio rose to 3.1% in end-June, from just 2.7% at end-2023, said Moody’s Ratings in a report.

Loan loss coverage also declined to 55% from 64% previously.

These delinquencies from retail borrowers have peaked and will gradually decline through 2026, according to Moody’s. The bank’s moderation of its loan growth will also help improve asset quality.

OCB's high exposure to the real estate and construction sectors will pose asset quality risks, although the rollout of key amendments to Vietnam's real estate laws will support the sector's gradual recovery,” the ratings agency said in its latest ratings report, where it changed OCB’s outlook from negative to stable.

However, profitability will remain lower than historical levels through 2026 due to narrowing net interest margins (NIM) and elevated credit costs.

OCB’s annualized return on tangible assets (ROTA) declined to 1.4% in H1, from 1.9% in end-2023.

Non-interest income will also moderate due to normalization from trading of foreign currencies and investment securities, Moody’s said.