The non-performing loan ratio alone is not enough to show the whole picture.
As September draws to a close, the market prepares for the Q3 2026 financial reporting season, when stories about the growth and health of banks gradually unfold. Besides profits and loan size, the end-of-period non-performing loan (NPL) ratio is one of the key indicators that investors pay attention to and compare across banks.
However, a single point in time is insufficient to reflect the overall improvement process or the pressures on asset quality. The end-of-period NPL only reflects the state at the time of reporting, while the evolution of this indicator over several quarters reveals the true trend, providing a more solid basis for assessing the effectiveness of risk management and the bank's prospects in the next period.
Along with NPLs, the results of debt resolution and recovery, as well as the ability to control newly arising bad debts, also need to be monitored. Debt recovery and resolution activities within the balance sheet help limit the number of loans that turn into bad debts or reduce problematic loan balances; while revenue from risk-managed debts will supplement revenue and offset previously recorded credit losses.
At the same time, limiting the 발생 of new non-performing loans reflects the effectiveness of credit quality control. Improvements in both aspects will strengthen the sustainability of the asset quality enhancement process.
Simultaneously, the performance of Group 2 debt (debt requiring attention) can help identify early changes in a customer's repayment ability. The control of this debt group, along with the downward trend of NPLs, can be a basis for assessing that asset quality is improving.
In addition, indicators such as provisioning, loan loss coverage ratio (LLR), and credit costs provide further insight into the bank's preparedness for credit losses, thereby helping investors assess its resilience and the pressure of provisions on profit prospects in subsequent periods.
Besides the above indicators, the method for calculating the non-performing loan (NPL) ratio also needs to be standardized. Compared to the conventional method based on customer loans, the NPL under Circular 31/2024/TT-NHNN has a broader scope, including: customer loans; financial leasing; discounting and rediscounting of negotiable instruments and securities; factoring; credit card outstanding balances; off-balance sheet payments under commitments; unlisted corporate bonds; credit granting trusts; certain deposits at other credit institutions; debt purchase and sale; purchase of certificates of deposit and certain letter of credit transactions.
This method places the non-performing loan ratio in relation to various credit risk-generating activities, thereby providing a more comprehensive view of the quality of the bank's loans.
Asset quality as seen from the model and improvement process.
The specific characteristics of the business model are also a factor to consider when comparing non-performing loan (NPL) ratios among banks. Individual NPLs reflect the parent bank, while consolidated NPLs take into account the subsidiaries within the consolidation scope.
For banks that also engage in consumer finance, securities, or leasing activities, differences in customers, products, and risk levels within each portfolio can create a gap between these two ratios.
Vietnam Prosperity Commercial Bank ( VPBank ; HoSE: VPB ) is a prime example of a bank possessing a diverse financial ecosystem spanning multiple sectors. To clearly identify asset quality, the individual and consolidated non-performing loan (NPL) ratios need to be considered within the specific context of each business segment, along with the evolution of Group 2 loans, provisions, and the results of debt resolution and recovery over various periods.
According to an assessment by Rong Viet Securities (VDSC), VPBank's NPL ratio under Circular 31 at the end of Q2/2026 showed a reverse trend, increasing by 15 basis points (bps) compared to the previous quarter for the entire system. The individual and consolidated NPL ratios decreased by approximately 15-16 bps to 2.03% and 2.79% respectively at the end of Q2.
According to VDSC, this result stems from the bank's efforts to manage risks, with net non-performing loans decreasing by 40% compared to the previous quarter, to VND 4,072 billion, combined with risk management of VND 4,001 billion while outstanding loans increased sharply.
Furthermore, analysts also pointed out a positive trend: assets with credit risk (RWA) increased by only 6.5% compared to the previous quarter, while credit increased by 12.6%. This result "implies that the new portfolio has a lower risk weighting."
From the perspective of the parent bank,FPT Securities (FPTS) believes that accelerating debt recovery, handling collateral assets, and controlling newly arising debts are factors contributing to a gradual reduction in the non-performing loan ratio from 2024 onwards.
Adding to the perspective on financial health, FPTS analyzes that VPBank's diverse financial ecosystem is helping it expand revenue streams and reduce its dependence on net interest income. In particular, OPES Digital Insurance leverages the bank's network and customer base to strongly develop its non-life insurance segment, thereby creating a relatively independent source of fee income separate from the credit cycle.
Source: https://anninhthudo.vn/ty-le-no-xau-co-thuc-su-noi-len-suc-khoe-cac-ngan-hang-post670693.antd
