Bad loan fears see local banks start to get cold feet

High input costs are already putting the squeeze on local enterprises

Almost all local banks are freezing new loans for new customers until the end of the year and limiting new loans for existing customers out of fears that enterprises facing difficulties from rising input costs will be unable to repay their loans on time.

VP Bank general director Le Dac Son said the bank had not been offering new loans to new customers in recent months. “It’s not because of the 30 per cent annual credit growth rate cap set by the central banks that we limited our new loan issuance. It’s the possible risks we run into offering new loans to new customers,” said Son.

Sacombank chairman Dang Van Thanh shared the same view, predicting that credit growth would be reduced later this year as enterprises hesitated to access bank loans with high interest rates and banks limited new loans to minimise the risk of bad debts.

ACB’s credit growth climbed close to the cap level a few months ago and the bank nearly postponed its credit operations. Local enterprises, meanwhile, are expected to have lower profits this year but still have enough to pay debts. Ngo Trung Kien, director of Saigon Garment and Textile No.2, which has invested in building a large workshop in the south, said the company faced difficulties with operations but still had enough money to repay bank loans.

“Difficulties exist and banks demand 30 per cent of the total funds that we pay for a maturity loan before re-lending. That creates more difficulties, and we have to find other financial resources,” said Kien.
Nguyen Tuan Anh, deputy general manager of Utxi seafood processing company, said the busy exporting season would increase liquidity for seafood exporters.

“Seafood exporters have the needed funds to repay debts as exports have been increasing and will continue to do so until the end of the year,” said Anh. “However, there are few banks willing to lend to local seafood exporters in US dollars, even though they have ample dollar-based funds,” said Anh.

Tran Du Lich, director of the Institute for Economic Research in Ho Chi Minh City, said bad debts were predicted to increase by the year’s end due to operation difficulties in local enterprises.