Credit growth remains negative in city
By Hong Phuc - The Saigon Times Daily
HCMC – Contrary to the positive growth trend of the national credits, the Jan-Jun credit growth in HCMC stands at minus 0.04%, showing the poor capital absorption capacity of businesses in the Southern Key Economic Zone.
This was revealed at a meeting between HCMC leaders and representatives of 16 banks last weekend.
A press release of the central bank last Saturday shows that the system’s credits had inched up slightly. As of end-June, credits grew 0.76% against late 2011, or 1.4% with investment capital balance in corporate bonds and treasury notes included.
According to the meeting, bad debts are rising in HCMC. Several banks see their profits dwindling and many bank’s branches have reported losses.
Both banks and enterprises remain cautious with bad debts.
However, the good news is capital is flowing into businesses, albeit slowly. The outstanding loans for production and business accounted for 85% of the total outstanding loans in the city in the first six months.
Notably, small and medium enterprises made up the largest portion of those provided with credit capital. The total number of businesses receiving Vietnam dong loans with preferential interest rates was over 4,200.
Some HCMC-based banks directly signed preferential credit contracts with small and medium businesses.
A banker in HCMC said small and medium enterprises ran into the most troubles. They do not have enough assets to secure loans, and even if they do, their assets are of low liquidity and low market values and very difficult to transfer.
In addition, their financial statements are not audited; financial data are not transparent and healthy enough, while evidences for borrowing purposes are insufficient. Most small and medium businesses do not receive guarantees from credit guarantee funds.
In its press release, the central bank said the chance of credit expansion in the coming time was small. The banking system is basically secure, but capital balance has not improved, while bad debts are picking up and some institutions still breach the regulated capital adequate ratio.
“Capital balance is still unstable as medium- and long-term loans still account for 42% of the total credits, same as the end of 2011, while most capital is mobilized from short-term deposits.
“As of end-May, as reported by the credit institutions, the total bad debts of the whole system accounted for 4.47% of the total outstanding loans of the economy (versus 3.07% at end-2011).”
“Dong lending rates have been cut but still stay at high, especially the proportion of high-interest loans remains large,” said the press release of the central bank.
The central bank requested commercial banks to closely supervise the operations of their corporate clients to timely propose measures on currency and credit. In addition, they are asked to coordinate with borrowers to review and assess repayment capacity of the latter, and then revise repayment schedules, offer interest exemption or reduction, and give out new loans to pay back old debts.
The central bank also required lenders to work with ministerial agencies and industry associations to seek solutions to handle inventory, remove difficulties for businesses and promote production and consumption.
A report of Vietcombank Securities Co. (VCBS) said: “We think interest rate reduction and credit growth will continue and become clearer from the end of the third quarter, as the banking system expects to inject VND50 trillion per month in the last six months to boost economic growth. Although credit growth has shown more optimistic signs, the bad debt ratio will likely surge further in the coming time.”