Banks struggle to boost credit growth

Vietnam's credit growth in August was an estimated 4.5%, well below expectations in the light of the government's target of 12% to 14% growth in credit for 2014.

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

Given the minimum 10% rate, banks still need to add 5.5% 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% target is very difficult to achieve."

"The 10% 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% 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% in the first six months.

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

MaritimeBank offers VND1 trillion (US$47 million) loans to Hanoi-based companies at a borrowing cost of 7% to 8% per year for short-term credit and 9% to 11% 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 (US$70.7 million) to individuals, and for consumer purposes and production plans, and by setting aside VND5 trillion (US$235.8 million) for small and medium-sized enterprises.

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

LienVietPostBank announced to lend VND2 trillion (US$94.3 million) for various terms at interest rates starting from 0%.

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% accounted for 4.45% of the total number of loans, while the outstanding loans with an interest rate of more than 13% accounted for 12.45%.

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