Although banks have strongly poured capital
into the market, the growth rate of outstanding credit remains
relatively slow. Meanwhile, the monetary policy, which is Circular
No.13/TT-NHNN (takes effect on October 1, 2010), will continue to
tighten lending activities of banks. This will make it more difficult to
cut deposit rate to 10 percent and lending rate to 12 percent, under
the guidelines of the government.
Narrow road for lending activities
In order to meet the increasing demand for loans, which is usually
becoming high in the end of the year, and to complete the yearly credit
growth targets, deputy general director of ABBank Pham Quoc Thanh said
the interest rates applicable to businesses in the Small and Medium
Enterprise Finance Programme III are one percent per annum lower than
the interest rates offered to other regular customers. The initial
credit limit of this programme is 80 billion dong.
Asia Commercial Bank (ACB) is launching the "Special three trillion dong
credit" programme for business customers, including private firms.
ACB's deputy general director Do Minh Toan said the programme would last
till the end of this year with negotiable lending rates ranging from
12.8 to 13 percent per annum.
Meanwhile, the dong short-term lending rates of ABBank for small and
medium enterprises are fluctuating from 13.5 to 14.25 percent per annum,
depending on the reputation and financial capacity of the firms. For
medium and long-term loans in dong, Thanh from ABBank said the bank
applies negotiable rates at about 14.5 to 15.25 percent per annum.
Compared to the previous month, negotiable lending rates have slightly
reduced, but the credit growth remains slow. The reason is that the
output source of firms has not been improved, so the needs for loans to
expand production and business activities are not high. On August 1, the
inventory index increased by 1.6 percent compared to July 1, and
increased by 37.3 percent compared to the same period of 2009.
According to Duong Thu Huong, general Secretary of Vietnam Banks
Association (VNBA), depending on the capital absorbability of the
economy and the abilities of firms to meet the loans' conditions, the
credit growth in the near future would then increase strongly or not. It
does not depend on banks.
On the other hand, banks have been competing more fiercely in raising
capital, in order to meet the requirements given in Circular No.13. This
has pushed input costs higher. Lending rates, thus, are not likely to
be further reduced.
Banks are allowed to use 80 percent of the total mobilised capital for
lending, of that, non-term deposits of economic organisations, social
security, and the State Treasury are not included in the mobilised
capital for lending. Circular No.13 would officially take effect in
about a month, and banks expect that the State Bank of Vietnam (SBV)
would adjust a number of provisions, for their credit activities to be a
little loosened.
Regarding small banks, while the capital mobilised from the population
is not high, at the same time, they have to carry out the charter
capital plan, the outstanding credit thus is possibly be tightened after
October 1. This is because, in order to raise the capital adequacy
ratio to nine percent as stipulated, banks must either reduce the
risk-weighted assets or increase their equity capital. Nevertheless,
when capital mobilisation becomes difficult as at present, many banks
would choose to reduce their credit scale.
Would credit growth targets be achieved?
Huong from VNBA said the credit growth target of 25 percent of the
entire banking system is achievable. This is because, compared to last
year, this year's target is much lower, and the demand for capital
usually increases in the end of the year. In the first seven months of
2010, outstanding credit growth of the entire sector reached 12.97
percent. This, according to Huong, is not a low figure.
Thank from ABBank agreed with that point of view, and said that, to late
July 2010, outstanding credit of ABBank reached 16.172 trillion dong,
while the yearly target is 17.340 trillion dong. Hence, the bank would
surely achieve the set target.
According to Toan from ACB, to date, ACB's outstanding credit of the
business section alone only reached 42 trillion dong, and in order to
complete the planned target of the year, the bank should have an
additional 12 trillion dong outstanding credit. After the special credit
programme is launched on August 18, to date, only 30 percent of the
three trillion dong credit was disbursed. However, Toan said if in the
fourth quarter, the demand for capital increases, ACB's credit growth
target of 60 percent would be easily achieved.
Certainly, outstanding credit growth depends very much on the recovery
prospect of the global economy, the export markets, the stability of the
domestic economy, and the belief of the people and businesses on
operating policies of the government.
Currently, compared to dong lending, demand for foreign currencies of
businesses remains high. Particularly, exporters still prefer borrowing
in dollars, since interest rates are only ranging from five to seven
percent per annum. Furthermore, since they have revenues in foreign
currencies to repay the banks, they are not too worried on the risk of
exchange rate fluctuations (although the interbank rate has recently
been increased by 2.1 percent).
Report of SBV's Hochiminh city branch also shows that outstanding credit
in foreign currencies of banks in the area to late August 2010 is still
higher than that in dong.
Specifically, outstanding credit in foreign currencies reached 175.4
trillion dong, up by 28.5 percent compared to early 2010, while that in
dong only increased by 5.8 percent.