Banks stand fast on quality of credit

More than a month has passed since the State Bank of Vietnam (SBV) green-lighted banks to lend to firms with bad credit if they have feasible investment projects and most bank executives have said they prefer to stay tight with capital.

“Banks can’t control how firms will use this money and if it used to pay back old debts rather than going into production or business plans, the banks will be the one who pay the ultimate debt,” said Eximbank chairman Le Hung Dung.

Eximbank’s credit grew by 8 per cent by the end of October and is likely to hit 10 per cent, significantly under the bank’s target of 15 per cent.

“Despite modest growth, Eximbank will not loosen its lending requirements; our foremost thought is credit quality,” said Dung.

General director of Ho Chi Minh City-based Nam A Bank Tran Ngo Phuc Vu said that although non-performing loans (NPL) are now somewhat under control, banks still need to carefully review customer credit relation records and real payment ability before lending to a firm with a poor credit history, not only leverage on the potential of a project.

Sacombank general director Phan Huy Khang said that amid credit difficulties, quality was most important. Besides collateral and lending requirements, a major decisive factor was project feasibility.

Khang said banks were better off being choosy in lending, as they were not out of the woods with bad debts yet.

The bank’s credit growth was estimated at approximately 15 per cent by the end of October, against a target of 20 per cent.

According to SBV Ho Chi Minh City branch deputy director Nguyen Hoang Minh, city-based banks’ bad debts stand at around 6.2 per cent of total outstanding loans, around the same as last year.

As such, banks cannot loosen up on credit controls just to boost lending, and need to keep quality at the forefront.

Minh also said the expectation lending may escalate by year-end period as usual would hardly be realisable and it was extremely hard for the banking sector to achieve 12 per cent credit growth as projected this year.