Vietnam - Banks' profits hit by property loans

BIDV, Vietcombank, Sacombank, Agribank, ACB, Vietinbank, Western Bank and NamViet Bank are among lenders of huge property-mortgaged loans.

Recently, a range of giants on the stock exchange have posted substantial losses such as Quoc Cuong Gia Lai JSC (QGC) and Saigon Tel (SGT). The majority of their capital has been found in the stagnant real estate market. The principle reason could lie in sluggish demand whereas interest payment has remained, assumed QCG.

One year earlier, QCG took an 11 billion dong loan with interest rate of 16.5pct that is due on 24 November 2011 at Vietcombank, Gia Lai branch. The collateral included land use right of plant plot No. 1265 and 772 in Binh Trung Tay Ward, District 2, HCM City and land plot A5-1 in Green Island, Danang and apartment No. 12, Lane 62, Cu Chinh Lan road, Hanoi with value totalling above 12 billion dong.

In addition, this giant borrowed some 40 billion dong at interest rate of 12pct-17pct pa with real estate collateral at Vietnam - Russia Joint Venture Bank in the same year. Also, BIDV provided a loan worth of some 50 billion dong that is mortgaged by property items and stocks of Nguyen Thi Nhu Lan, chairwoman of QCG's management board.

What is more, several long-term loans of hundreds of dong have also been mortgaged by many property projects and BIDV has emerged the biggest creditor with more than 100 billion dong.

Similarly, SGT has suffered losses from land renting, warehouse selling and renting due to soaring lending rate which made its financial costs rocketing 270pct in 2011 over the previous year.

Likewise, Hoang Anh Gia Lai's major creditors are BIDV, Vietcombank, Sacombank, Agribank, ACB and Vietinbank, the biggest of which is BIDV.

Long-term loans have cost this group plenty of real estate mortgage namely total assets of project Dack Psi 2B; land use right of a land plot at 33 Nguyen Cong Tru, Buon Me Thuot City, Dak Lak Province; total assets of concrete plant at phase 1; concrete mixing station; total assets of Hoang Anh Gia Lai Hotel; HAGL's head quarter building in Gia Lai; land use right of An Tien project; land use right and related assets of New Saigon project, Danang Plaza project, Dawsk Srong 2 project and the like.

Many commercial banks are willing to finance this giant due to its impressive reputation, influential level, operation scale and business areas, said one of its lenders.

Regarding the debts of CEO Pham Thi Dieu Hien said that her companies have been debtors to nearly ten commercial banks with total debts mounting over 1 trillion dong.

Assumingly, such massive debts are put down to inappropriate deployment of loans for investment in real estate and securities.

According to Bianfishco's report to the state bank and several authority agencies, nine current creditors of this seafood company include Housing Development Bank, Can Tho branch (20 billion dong), A Chau Bank (61.3 billion dong), Eximbank, Saigon branch (30 billion dong), An Binh bank (63.5 billion dong and US$10 million), BIDV (139.2 billion dong and US$2.6 million), Vietnam-Thailand Bank, HCM City branch (US$3.5 million), Vietnam Development Bank, Can Tho-Hau Giang branch (310.2 billion dong), Habubank, HCM City branch (63.9 billion dong) and Vietinbank, Can Tho branch (3 billion dong).

As such, the total debt is estimated at 1,275 billion dong whereas is total assets are currently worth more than 2,700 billion dong, according to an auditing firm.

It is normal that doing business requires bank loans, yet given the property market stagnancy real estate collateral would definitely be a challenge for banks and enterprises alike, according to a bank's manager. Many lenders are forced to bargain away mortgaged land upon the unlikelihood of debt recovery, he added.

VietBiz24

Business & Investment Opportunities 
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com

Dear Reader,

May I invite you to visit our new blog: IIMS-Asean http://iims-asean.blogspot.com/

News and activities of the International Institute of Medicine and Science Asean Chapter of IIMS, Inc. California, USA - Health care, Life Science, Education, Research, Philanthropy. Asean is the economic organisation of ten countries located in South East Asia: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. IIMS is a non-profit organization.