Banks suffer slow 2012

State Bank figures show that local banking sector’s credit growth contracted around 2 per cent in 2012’s first quarter.

Current VND lending rates fetch around 14.5-16 per cent, per year and the lowest 13.5 per cent, per year applicable to firms in agricultural, rural and export areas committed to selling foreign currencies to banks.

Lending to production and trading firms is 16.5-20 per cent, per year and the lowest 15 per cent, per year. Firms in non-priority areas borrow at 20-25 per cent, per year.

These rates, almost 2 per cent lower than those a month ago, still remain high to firms. Besides, the State Bank just enacted Circular 10/2012/TT-NHNN restricting credit growth for three consecutive months to banks with bad debt amounting to 10 per cent of their total outstanding loans.

ACB’s general director Le Xuan Hai assumed firms were either hesitating or did not want to take on loans, though in fact lending rates were significantly relaxed compared to the previous months.

“Interest rates are not be a decisive factor to whether firms take on loans or not if the economy was still in a pickle. In fact, most loans are for firms’ production, not targeting production or business expansion,” said Hai.

Oriental Commercial Joint Stock Bank (OCB) general director Trinh Van Tuan said it was hard to push up credit growth, though OCB saw copious capital sources.

OCB’s credit also contracted 2 per cent in the first three months of the year.

DongA Bank’s deputy general director Nguyen Thi Ngoc Van assumed banks’ still high lending rates kept firms away on the back of sagging market consumption.

To promote this year’s credit growth, parallel to corporate customers DongA Bank has paid due heed to the individual customer segment.

Banks’ personal loans currently charge 18-19 per cent per year, but customers still hesitate to borrow though the land and housing price has dropped after a long hibernation and central bank has recently green-lighted banks to step up lending to property and securities areas.

In fact, personal loans, including lending to house repairs and purchases, saw slow pace of capital disbursement. ACB has made efforts to scale up lending to home purchases but it eyed slow growth in outstanding loans in the first quarter. Hai predicted ACB credit growth would accelerate from September 2012.