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Foreign banks take advantage of credit crunch
While the stock market takes a pounding from foreign institutional investors continuing to off load their shares, foreign banks are moving in the opposite direction.
Loans to businesses are on the rise. An expansion of foreign ownership ratios in Vietnamese financial institutions is on the up and new branches are sprouting up in the country faster than mushrooms during autumn dew.
The growth is being fuelled by gains in the foreign currency credit market since the beginning of 2008. Statistics showed that by the end of August, total outstanding loans in foreign currencies provided by 26 foreign banks in Vietnam had increased by 77% over the previous year.
Compare that to average growth of the industry of 25.8%, and it is clear that offshore lenders are taking advantage of a nation-wide credit crunch imposed on local outfits. Outstanding loans in foreign currencies by foreign banks accounted for 30.2% of all industry loans.
Though foreign bank branches have recorded high growth rates, credit quality also remains strong, with non-performing loans coming in at just 1.1%. .
Loans are on the rise as foreign invested projects continue to see an upswing and local firms are increasingly in need of dollars to import equipment and materials for production.
While Vietnamese banks once faced liquidity problems, foreign banks have not been shackled by the same constraints. Local banks have to cap credit growth at 30% to help curb inflation, while foreign lenders are not bound by any restrictions.
Domestic banks are forced to set rates for the greenback at 8-10%, which were three times higher than Sibor (Singaporean interbank rate), while their international counterparts are able to offer much lower rates.
Foreign bankers are also turning their attention to picking up stakes in local lenders and securities firms.
On August 28, 2008, HSBC announced it brought a 20% of stake in Techcombank, while Standard Chartered Bank raised its ownership ratio from 8.84% to 15% in Asia Commercial Bank.
Other deals were also made in the last eight months. May Bank purchased a share in An Binh Bank, France-based Societe Generale S.A purchased 15% of SeABank. Phuong Nam bank got approval from the central bank to sell 5% to Singapore’s UOB banking group and Eximbank has completed procedures to choose Sumitomo Mitsui Banking Corporation (SMBC) as its foreign strategic partner.
VNN
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