Local banks fret over credit growth decision

Bao Viet Bank - illustration photo

Representatives from a number of small joint stock banks said the regulation would place them in difficulties when explaining the change to shareholders as many banks’ business plans were approved by the management and shareholders.

They said that lower credit growth would mean lower profits since credit activities were small banks’ key revenue-raising sources.

Bao Viet Bank general director Phan Dao Vu said most banks would have to downwardly revise 2011 growth targets after enactment of Instruction 01-NHNN which demands credit institutions to keep 2011 credit growth at less than 20 per cent so as to rein in inflation and ensure macroeconomic stability.

Newly established Bao Viet Bank initially proposed around 80-90 per cent growth in outstanding loans worth of VND5-6 trillion ($241.5-$289.8 million) for 2011. Now it will have to downwardly revise the credit growth target to make it suit reality.

“We hope banking authorities will not be too strict on fresh banks like us,” Vu said.

BIDV management board chairman Tran Bac Ha said bank credit growth in 2011 would be revised to fine-tune credit growth and would not exceed 19 per cent.

BIDV would reduce credit growth in non-manufacturing sectors, particularly to control property loans of less than nine per cent of total outstanding loans and that for securities of less than 0.5 per cent, said the bank executive.

Chairman Ha Van Tham of Dai Duong - the owner of Ocean Bank, said the bank downwardly revised 2011 business targets which were projected in late 2010.

“With ample deposit sources, we take it [Instruction 01 enactment] as a good opportunity to source fresh customers,” Tham said.

He added that Ocean Bank planned to expand loans to manufacturing and export with favourable lending rates responsive to the Vietnamese government’s commitment to bridle inflation.

However, industry experts suggest banking authorities adopt flexible regulations relevant to banks’ credit growth based on banks’ size. In their view, small banks should be given more preferences to uphold their development.