| Vietnam caps big banks’ 2009 credit growth at 25 percent | |||||||
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The Lao Dong newspaper on Friday cited a central bank report as saying state-owned banks and two partly private lenders Vietcombank and VietinBank have been asked to cap their credit growth at 25 percent this year. The central bank also asked other partly private banks to submit their credit expansion plans by July 20, the newspaper reported. The credit growth cap imposed on three state-owned commercial banks plus Vietcombank and VietinBank, which together account for about 70 percent of lending, was issued after a meeting on Tuesday. “Banks must tightly control credit and are not allowed to ease their conditions on credit,” the central bank said in a statement issued after the meeting. The government said last week that overall credit growth this year should be 25 percent to 27 percent. Central bank data showed loans at the end of June had risen 17 percent since the end of 2008.
Vietnam could face the return of high inflation in the second half of this year, central bank Governor Nguyen Van Giau said. He has urged banks to lend more to production-oriented projects while reducing credit to non-manufacturing sectors. Vietnam’s economy, buffeted by the global recession, grew by an estimated 3.9 percent in the first half of 2009 from the same period last year, while annual inflation sank to 3.94 percent, the lowest level since January 2004. “Inflation in the second half of this year will be double that of the first,” Dinh Xuan Hang from the Finance Institute told a conference in Hanoi on Thursday. Hang forecast annual inflation this year would be between 7.5-8 percent. The 25 percent credit growth cap could affect VietinBank’s business but leaves some leeway for state-run Agribank, Vietnam’s largest lender by assets, and Vietcombank, the largest partly private bank. In March, Agribank forecast loan growth of 15-17 percent in 2009, up from 14 percent in 2008. Vietcombank has projected lending growth of 18 percent this year, accelerating from 15.5 percent last year. Its loans totaled VND129 trillion (US$7.2 billion) at the end of June, up 14 percent from the end of 2008. VietinBank has targeted credit growth this year of 28.9 percent, after an 18 percent expansion last year. Its loans in April had grown more than 10 percent from 2008, VietinBank’s share prospectus said. Besides the move to curb lending, the State Bank of Vietnam is planning to amend some banking regulations in a bid to ensure the banking system is safe, Sai Gon Tiep Thi newspaper reported Friday. Under one of those amendments, the maximum ratio of the short-term funds that banks can use to offer medium and long-term loans will be lowered to 30 percent from the current 40 percent. This means banks will need to restrict their medium and long-term loans or they will have to raise more funds. Bad loans Non-performing loans have increased in the banking system in the first half as the economic downturn has affected borrowers. Duong Thu Huong, general secretary of the Vietnam Banks Association, said at a seminar in Ho Chi Minh City on Tuesday commercial banks now found it harder to have their loans repaid as their clients faced difficulties in doing business. Bad debts rose to 2.6 percent in the six months ending June compared to 2.1 percent at the end of last year, according to Huong, who noted the ratio still remained within the safe level of 3 percent set by the central bank. However, Alexandre Legendre, partner of Leadco Vietnam Legal Counsellors, said the ratio could be higher in reality. “True level of non- and underperforming loans is difficult to gauge in Vietnam due to lack of information but the ratio is expected to rise because of exporting companies affected by the global financial crisis,” Legendre said, noting that a survey released by an independent research firm said the real ratio was probably between 15 and 20 percent. An official from a commercial bank said the bad debt ratio was not less than 5 percent. Matthew Lourey, Grant Thornton Vietnam’s corporate finance director, said he thought the ratio was high in Vietnam and commercial banks needed to improve their risk management. Source: Thanh Nien, Reuters (With additional reporting by Minh Quang) | |||||||
| Story from Thanh Nien News Published: 18 July, 2009, 14:58:35 (GMT+7) Copyright Thanh Nien News | |||||||
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