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Banks sanguine despite rising bad debts
Bad debts (non-performing loans -NPLs) of local commercial banks have showed an upward tendency due to difficulties caused by the global financial turmoil, but the banks believe they remain on top of the situation, reports the Vietnam Investment Review.
In 2008, the Asia Commercial Joint Stock Bank (ACB)’s bad debt rate was 0.9 per cent, 11 times higher than the previous year, while the bank’s credit growth was just 10 per cent. According to ACB’s General Director Ly Xuan Hai, the rate was reasonable given the monetary market situation in 2008.
This year, the bank has targeted a credit growth rate of 87 per cent while keeping its NPL rate at 1.2 per cent or less.
By the end of March, ACB’s outstanding loans were VND36.903 trillion, a year-on-year increase of 18 per cent.
To minimise credit-related risks this year, the bank plans to focus investments on small and medium sized accounts and strengthen on-the -spot controls over the borrowers’ health.
In particular, the bank plans to loan big corporations only 10-15 per cent of its total lending for the year and to ensure that over 88 per cent of its lending is done against property as collateral.
The Orient Commercial Joint Stock Company (OCB)’s bad debt ratio in 2008 was 2.87 per cent. This year, the bank plans to increase its lending by 25 per cent and keep the NPL rate at less than 2 per cent.
The Sai Gon Thuong Tin Commercial Joint Stock Bank has also targeted a credit growth rate of 50 per cent this year, while keeping the NPL rate at less than 2.5 per cent.
Viet Nam Export and Import Commercial Joint Stock Bank (Eximbank)’s NPL rate last year was 4.71 per cent of total outstanding loans, more than double the 2 per cent it had targeted.
For this year, the bank targets credit growth of over 60 per cent to VND34 trillion.The bank will also focus on measures to reduce bad debts.
Financial experts say most commercial banks will be able to keep their bad debts under control this year, but add that they should be vigilant about the possibility of extending overdue debts through improper management.
Gauging the recovery
TheGovernment’s stimulus package, equaling 12 per cent of GDP, have led to the nation’s positive growth rate and the reawakening of financial and real estate markets in the first quarter.
Thanks to the 4 per cent interest rate subsidy offered by the stimulus package, many enterprises have been able to restore their production and trading activities. As a result, more employment has been created for labourers.
While recognising the positive effects of the interest rate subsidies, many experts say domestic enterprises are finding it very difficult to find markets for their products.
If enterprises cannot sell their products, they would not need to borrow the money to develop production even if lending interest rates are cut to zero, they add.
They suggest local banks increase granting personal loans to encourage individuals to buy commodities while enterprises are encouraged to intensify their investment activities.
In addition, enterprises should be assisted in finding new markets and promoting their brand names in both domestic and overseas markets.
International trading firms should be supported with credit guarantees and export bonuses, experts say.
They also advise enterprises to restructure production and trading activities to minimise costs and increase quality.
Apparel orders resume
After hitting a plateau for about three months, domestic garment and textile companies have begun receiving orders from major apparel importers from the US and EU markets again since early April.
According to the Ministry of Industry and Trade, the domestic garment and textile industry’s export value in the first three months of the year decreased by 4.2 per cent over the same period last year because major importers cut their orders due to the global economic turmoil.
However, with the situation improving slightly, the apparel industry has been reaping the benefit of an increasing number of import orders.
Many companies have even won enough contracts to keep them busy from now until the third quarter of the year. Some have had to employ more workers to ensure delivery schedules.
The Nam Dinh Garment Company (Nagaco) is a typical case. Most of the company’s main partners are from the EU. After a period of decreasing imports, these customers have resumed signing contracts with Nagaco in large quantities.
The Hung Yen Garment Joint Stock Company (Hugaco) is also facing a similar situation. The company has recently signed contracts equal to 80 per cent of the figure recorded at the same period last year.
Many Hugaco clients from the US, including JC Penny, K Mart, Target and Union Bay, have placed more orders with the company than before.
One feature of the new orders is that most of the products are in the mass production category, accounting for 70-80 per cent, with orders for luxury products falling sharply.
The return of major apparel importers with increased orders is of major significance. It has helped stabilise domestic enterprises’production activities, maintaining their turnover and profits, and created employment. It will also help the apparel industry reach its export target of between US$9.1 and 9.5 billion in 2009.
However, the Viet Nam Textile and Apparel Association has warned that enterprises still need to apply measures to cut production costs, increase product quality and establish competitive prices to keep old customers and win more new ones.
The agency has also stressed the need for producers to strengthen trade promotion work and search for new markets to increase their export value.
Three new foreign-invested projects with registered capital of US$1.4 million were licensed in HCM City’s industrial parks (IPs) and export processing zones (EPZs) in the first quarter of this year.
This is just 9 per cent of the amount recorded in the same period last year.
According to the HCMC Export Processing and Industrial Zones Authority, total new investment into these zones, including additional funds injected into operational projects, was just $29.3 million in the first quarter, 80 per cent of last year’s figure.
During this period, the number of layoffs increased at local IP enterprises.
Some 49 enterprises faced difficulties in their production in the first quarter, leading to the layoff of 8,000 people while 11,000 others were underemployed, working four days a week instead of six.
However, nine of these enterprises have seen orders coming in again in recent days, and expect to recruit thousands of workers again.
The city currently has 12 IPs and three EPZs which are home to some 1,150 projects with a total registered capital of $4.4 billion, including 463 foreign-invested projects worth $2.6 billion.
Thien Ly
vietnamnews
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