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Loans to non-production sectors axed
Lending to non-manufacturing sectors in HCM City is decreasing sharply thanks to banks' efforts to cap credit growth at 20 per cent as ordered by the State Bank of Viet Nam.
A source from the central bank's HCM City branch said that by late April, outstanding loans to non-production sectors in the city totalled VND138 trillion (US$6.7 billion), including VND97 trillion to the property industry and VND34 trillion to retail borrowers.
Around VND7 trillion was pumped into the stock market.
Personal lending saw the sharpest fall at 7.4 per cent. However, loans for securities were down only 2.8 per cent and to real estate companies by only 1.3 per cent.
In April, outstanding loans at city banks rose by a mere VND2.2 trillion because interest rates saw a surge, with some banks demanding up to 26 per cent.
Deposits mobilised by banks continued to go down last month, falling by nearly 7 per cent year-on-year though interest rates at many banks exceeded the central bank's 14 per cent cap. Foreign currency deposits remained virtually unchanged after the central bank capped interest at 3 per cent.
Many banks said outstanding loans to the real-estate sector reduced slowly (1.3 per cent) because, with no one wanting to pay in advance, repayment is slow.
With the property market frozen, developers are unable to sell their products, while most loans to this sector are for terms of more than 10 years, according to the general director of a minor joint-stock bank in District 1.
According to the State Bank of Viet Nam, 24 banks have loans to non-manufacturing sectors, particularly real estate, accounting for 25 per cent or more of their total loans.
For some of them, the figure is up to 45 per cent.
This means several banks will be unable to fulfil the SBV's demand to reduce non-manufacturing loans from 26.7 per cent now to 22 per cent by June and to 16 per cent by year-end, according to analysts.
It also means such banks would be forced to double their compulsory reserves and have the scope of their operations restricted in the last six months of 2011 and 2012 as warned by the central bank, they said.
After cutting back on property, securities and personal loans, many banks are looking to make up by lending more for production activities. However, this too has been curtailed since the central bank has capped credit growth for the year at 20 per cent.
The vice chairman of a city-based joint stock bank said his bank stopped lending to real estate projects two months ago and hiked lending interest rates to 25-26 per cent.
Yet it would be hard to reduce outstanding loans to non-manufacturing sectors to 22 per cent by June, he said.
The property industry said banks' refusal to lend is piling more pressure on the beleaguered real-estate market, making recovery even harder.
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