Credit growth a tough ask

With 2012 credit growth lower than 2011’s, banks are struggling to lend as current lending rates remain high parallel to banks’ stringent requirements, while firms are hesitate to borrow on the back of sinking consumption.

Eximbank’s deputy chairman Pham Trung Cang said the bank’s credit growth contracted 5 per cent in the first four months of 2012.

The bank saw a slow disbursement pace even with preferential credit packages catered to corporate customers in priority areas such as import-exports, supporting industries and small- and medium-sized enterprises.

“Our bank revised lending rates to suitable levels for firms even when the government has yet to cap lending rates at 15 per cent, per year to some priority areas. With good customers, the bank willingly lends out at rates below the current ceiling rate. But, it is rather hard to find out good customers in this current context,” said Cang.

Cang said fewer firms wanted to borrow in the face of sinking consumption.

“Our bank can hardly accomplish the assigned credit growth of 17 per cent for 2012 if no improvements are seen until the year’s end,” Cang said.

While interest pressure is one factor leading to firms’ low capital absorption, bank executives said dwindling output market and rising unsold stock was the largest hindrance facing firms.

ACB general director Ly Xuan Hai said the interest rate was not the single decisive factor to firms’ decisions to borrow.

At ACB, credit growth in the first four months was below expectations against a stable growth in deposit amount. ACB then needed to exert much energy into making its 17 per cent assigned credit growth achievable in 2012, according to a bank source.

Ho Chi Minh City-based HDBank saw its credit growth sink 5 per cent in the first quarter of 2012.

“We cannot lend out at any cost while finding good customers with feasible business plans is extremely hard in current context,” said HDBank’s general director Nguyen Huu Dang.

HDBank succeeded in controlling bad debts at below 1.63 per cent by late 2011.  This year, the bank manages to keep this rate of less than 2.5 per cent.

Orient Commercial Bank (OCB) credit growth contracted 2 per cent by mid April 2012.

 National Financial and Monetary Policy Advisory Council member Tran Du Lich assumed rising bad debts was a stumbling block to credit growth, hence parallel to dealing with weak banks, the State Bank needed to shortly address the banking system’s bad debt dilemma, paving the way for credit expansion.