Banks still bleak about boosting credit in 2014

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The government’s target of 12-14 per cent credit growth is being scrutinised as overly ambitious by banks, though lending rates are falling and last year’s worrisome bad debt issue has been partially addressed.

According to Sacombank general director Phan Huy Khang, his institution plans on 14-15 per cent credit growth for 2014 and will continue focusing on boosting personal loans and launching concessionary credit packages to support weakened firms and attract new customers.

However Khang said that finding good customers may prove difficult given current conditions as the lending rate was dropping from firms suffering losses due to low consumption.

Another issue is that under current regulations, banks can only use 30 per cent of their short-term deposits for medium and long-term loans, a hindrance as deposits are usually short-term.

General director Tran Ngo Phuc at NamA Bank said that since the threat of bad debts still looms and firms are not adapting well to market shifts, banks will have to be stalwart in their risk management.

“To boost credit growth, our bank will increase lending to individuals, traders, small and medium-sized enterprises, and countryside areas,” added Phuc.

Though Mekong Development Bank (MDB) succeeded in keeping its bad debt rate below the 3 per cent threshold last year, CEO Tay Han Chong expressed his concerns about increasing lending during a time that firms were still facing great hardship.

To bolster credit growth, the bank will increase lending to low-risk areas such as agriculture and state employees. MDB will also keep a closer eye on risk-prone lending such as vehicle purchases,” said Chong.

Similar to NamA, Saigon Commercial Joint Stock Bank (SCB) announced it would boost credit to small and medium-sized firms, families, traders in urban areas and the countryside.

SCB also said up-and-coming traders in urban areas would be another credit priority, as they find it difficult to borrow from bigger banks due to stringent lending requirements.

“This gives us an opportunity to increase market share while at the same time alleviating risks involved with scaling up individual lending,” said SCB’s acting general director Vo Tan Hoang Van.

Discussing the credit growth target, State Bank Governor Nguyen Van Binh said it will continue capping banks’ credit growth, as in previous years, to levels within an institution’s ability, but said flexibility would be granted in particular circumstances.

However Binh also highlighted the importance of safe and careful credit requirements to ensure the stability of the banking system.