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Banks struggle to boost credit growth

HA NOI  — Vietnamese banks are likely to promote lending programmes that hopefully will help them to either unleash idle capital or boost the sluggish credit growth toward the end of the year.

A customer conducts a transaction at Maritime Bank in Ha Noi. Vietnamese banks are likely to promote lending programmes in order to boost sluggish credit growth.
A customer conducts a transaction at Maritime Bank in Ha Noi. Vietnamese banks are likely to promote lending programmes in order to boost sluggish credit growth.

Viet Nam’s credit growth in August was an estimated 4.5 per cent, well below expectations in the light of the government’s target of 12 to 14 per cent growth in credit for 2014.

State Bank of Viet Nam Deputy Governor Nguyen Thi Hong expected credit growth to reach 10 per cent by the end of the year, but expressed the hope that it would exceed this figure.

Given the minimum 10 per cent rate, banks still need to add 5.5 per cent to make it up.

“Capital demand may increase in the last few months of the year when businesses get busy, preparing for Tet festival,” said Cao Sy Kiem, chairman of the management board of DongA Bank. “However, a 12 to 14 per cent target is very difficult to achieve.”

“The 10 per cent target is only achievable if the government’s programmes to bolster the total demand are laid out clearly with every single effective step and taken seriously, while banks and enterprises are able to work cooperatively to pump and absorb capital,” Kiem said.

Some bankers said the competition was likely to become tougher that would keep all lenders on their toes.

DongA Bank, which achieved 4 per cent credit growth in the last eight months, now aims to provide loans to borrowers from rural and agricultural businesses, private sector and households who evidently have high capital demand, good capital utilisation and low risk of bad debts.

Sacombank earlier this week launched a priority package of VND2.5 trillion (US$118 million) for importers, exporters, and those in aquaculture, pharmacy, gasoline, transport, tourism, textile and garment, shoes, electronic components, food and consumer goods sectors. The minimal lending rate is 7 per cent in the first six months.

One of the big four banks by assets, Vietcombank has just announced a VND3-trillion ($141.5 million) credit package, with the lending interest rate set at 7.99 per cent per annum.

MaritimeBank offers VND1 trillion ($47 million) loans to Ha Noi-based companies at a borrowing cost of 7 to 8 per cent per year for short-term credit and 9 to 11 per cent for mid and long-term loans.

Tran Xuan Quang, CEO of SME Banking at Maritime Bank, said that banks were always willing to help enterprises to overcome economic difficulties. However, enterprises themselves needed to improve their financial management to get their money’s worth.

HDBank has made a similar move by giving VND1.5 trillion ($70.7 million) to individuals, and for consumer purposes and production plans, and by setting aside VND5 trillion ($235.8 million) for small and medium-sized enterprises.

ABBank has joined the race by offering personal loans worth VND1 trillion ($47.07 million) at 8.5 per cent for the first 12 months.

LienVietPostBank announced to lend VND2 trillion ($94.3 million) for various terms at interest rates starting from zero per cent.

Under the current circumstances, bankers expect an improvement in the total demand, purchasing power and employment rate, which are important factors to bolster businesses and production.

Currently, credit institutions have adjusted the interest rate of old loans. As of August 14, the outstanding loans in dong with an interest rate of more than 15 per cent accounted for 4.45 per cent of the total number of loans, while the outstanding loans with an interest rate of more than 13 per cent accounted for 12.45 per cent.

Central bank’s Deputy Governor Hong said the lending rate of credit institutions was expected to decline by 0.5 to 1.5 per cent in 2014.