Banks target familiar clients to boost credit

LienVietPostBank agreed to provide a VND2 trillion ($95 million) loan for the PetroVietnam-invested Vung Ang 1 Thermal Power Plant this month.

Vietcombank and SeABank this month signed a credit agreement worth $150 million with Petrovietnam Exploration and Production Corporation. Vietcombank will provide 83.5 percent of the funding with the remaining $24.75 million covered by SeABank.

TPBank signed an agreement providing VND2 trillion ($95 million) to Vietnam Railways to bolster the company’s working capital.

Sacombank, Agribank, MHB, OCB, Military Bank, ACB, NamABank, Navibank, VietinBank and DongABank also granted VND289 billion ($13.7 million) to 34 enterprises in Ho Chi Minh City’s Go Vap district alone.

While this is by no means a new approach, targeted credit packages have become more common this year. At the end of last year, to meet the greater year-end demand for capital, many banks offered VND1 trillion-VND10 trillion ($47.5 million-$475 million) in loans at 7-9 per cent interest. However, disbursement was slow as many firms could not afford to take on extra debts.

According to experts, targeting specific customers with real need for capital will help banks ensure their credit growth for the future. The agreements are also often characterised by long-term mutual benefits, including the banks providing additional financial services.

In addition, this closer co-operation means greater trust and the likelihood that banks will be inclined to extend credit to other projects.

When talking about the recent PetroVietnam-LienVietPostBank credit agreement, PetroVietnam’s chairman Phung Dinh Thuc said this was the first project between the state-run oil and gas giant and the bank. PetroVietnam was implementing several petrochemical, industrial gas and electricity projects and LienVietPostBank would act as one of the group’s most important financing partners.

However, Dang Ngoc Ha, strategy deputy director of VietA Bank said the approach might meant that capital would fail to be allocated effectively if banks tended to only focus on major clients, especially enterprises with close relationships to the banks.

However, Governor of the State Bank of Vietnam Nguyen Van Binh praised the move, claiming credit growth might hit 10 per cent by the end of the year.

The Vietnam Asset Management Company (VAMC) also bought nearly VND35 trillion ($1.66 billion) of non-performing loans (NPLs), which had acted as a barrier for credit growth. “The purchase of NPLs, together with efforts to restructure debts and settle NPLs via greater risk provision has contributed to GDP growth of 5.4 per cent this year,” said Binh.