May 21, 2012

Vietnam - Four lenders post negative credit growth in Q1 of 2012


Amongst nine listed banks, four lenders posted negative credit growth in the first quarter of 2012 and two others saw falls in credit year-on-year.

According to the State Bank of Vietnam (SBV), the credit, from early this year till March 26, was negative 1.96 percent against the end of 2011. With total outstanding loans of the whole banking system as of the end of 2011 at about 2,500 trillion dong, the lending of the entire banking system in the first three months of this year decreased about 49 trillion dong.

In the same period of 2011, the credit growth of the whole banking system was 3.67 percent, equalling to about nearly 85 trillion dong being pumped to the economy.

Reviewing each fiscal report of banks, it is easy to see that the lending situation to the outside of many banks is facing many difficulties although from early this year, many banks have launched lending packages with preferential interest rates and loan conditions, worth trillions of dong per bank.

The statistics from fiscal statement of nine listed banks on the stock market showed that, as many as four banks posted negative credit in Q1/2012 and two others saw fall in credit in comparison with the same period last year.

Notably, low credit growth was seen in five listed banks with the largest lending market share as of the end of 2011. In particular, as calculated, the total lending market share of nine listed banks as of the end of 2011 was 34.1 percent, of which, the market share of top five banks was 29.5 percent.

Particularly, Vietnam Commercial Joint Stock Bank of Industry and Trade (VietinBank-CTG) and Vietnam Commercial Joint Stock Bank for Foreign Trade (Vietcombank-VCB) posted negative credit growth at 2.6 percent and 0.57 percent in Q1/2012 respectively while in the same period last year, the credit growths of these two banks were 7.4 percent and 11.9 percent. These are two banks with the largest lending market share amongst listed banks.

Meanwhile, Vietnam Export Import Commercial Joint Stock Bank (Eximbank-EIB) posted the strongest decline in lending activities in Q1/2012 with credit at negative of up to 6.9 percent. Asia Commercial Joint Stock Bank (ACB) and Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank-STB) posted very low credit growth (at 1.8 percent and 0.4 percent).

Many banks are now facing hardships in lending activities due to the lending interest rate still remains too high together with severe loan conditions, preventing enterprises from accessing bank loans.

The central bank's report stated that the lending interest rate of banks in Jan-March 2012 increased against the same period last year. Till the end of March 2012, the lending interest rate for agriculture and rural area and export was popularly at 14.5-16 percent per year and the lending interest rate for non-prioritised sector was at 20-25 percent per year.

Although the lending interest rates decreased versus the first two months of this year, it is still high for many businesses. At the annual general meeting (AGM) 2012 of Vietnam-Germany Steel Pipe Joint Stock Co, Le Minh Hai, deputy general director said that to earn profit from business activities and have solvency, enterprises can bear interest rate of 12-13 percent per year only.

Therefore, even though the lending interest rate decreases to 15 percent per year in May, banks will still find it hard to improve lending situation, Nguyen Phuoc Thanh, Vietcombank's general director said.

Implications of credit flows decline are the stagnancy of the economy in the first months of this year. Accordingly, economic growth in Q1/2012 reached 4 percent only, the lowest level in the past three years and the index of industrial production (IIP) of processing and manufacturing sector in Q1/2012 increased 3.2 percent over the same period last year, lower than the growth of the same period in years of 2010 and 2011, respectively at 10.6 percent and 13.4 percent.

The difficult situation along with the solvency of enterprises has also affected the credit quality. Accordingly, the bad debts ratio of nine listed banks as of the end of March 2012 increased from the end of 2011. Especially, Hanoi Building Commercial Joint Stock Bank (Habubank-HBB) posted bad debts ratio at up to 9.7 percent. Facing this situation, in the near future, Habubank will have to merger with Saigon Hanoi Commercial Joint Stock Bank (SHB) to ensure the safe banking system.

As reported by the central bank, till the end of April, the credit growth was still at negative 0.66 percent. This figure will continue to threaten the country's credit growth target of 15-17 percent in 2012 and gross domestic product (GDP) growth goal at about 6 percent this year as well as the survival of companies.

SBV's governor, in a direct dialogue late last week said that the deposit interest rate by the end of 2012 would fall to 9-10 percent per year.

VietBiz24


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