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Foreign banks seek fair credit growth policy
With the confidence of satisfactory business results in 2011, many foreign credit institutions in Viet Nam have proposed that the State Bank of Viet Nam to loosen the credit growth policy for them, suggesting a rate of least 17 per cent, equal to those of domestic banks.
Market shares held by foreign credit institutions including branches of foreign banks in Viet Nam now represent a modest 11.3 per cent of the domestic banking market. The credit growth rate for this sector is not very high either.
According to the State Bank of Viet Nam (SBV)'s branch in HCM City, home to a majority of the foreign banks in the country, outstanding loans of foreign banks in 2011 was just 7 per cent. However, they have great potential to increase credit growth since they operate effectively with very low bad debt rates.
This can be seen in last year's performance, where domestic credit institutions struggled while foreign banks in Viet Nam achieved relatively good business results.
The HCM City SBV branch says that by October 2011, Return On Assets (ROA) and Return On Equity of foreign banks in the country averaged 0.16 per cent and 6.9 per cent, respectively.
The Hong Kong -Shanghai Banking Corporation (HSBC) Vietnam Ltd. is an example. Its General Director, Sumit Dutta, said that in the first six months of 2011, the bank's pre-tax profit stood at US$82 million, up 116 per cent compared with the same period in 2010.
The General Director of Australia-based ANZ Vietnam, Tareq Muhmood, also said that 2011 was a successful business year for the bank.
A foreign bank representative in Viet Nam, who declined to be named, said that the current credit growth limit was too low for his bank.
He said most foreign banks in Viet Nam were healthy because of good risk control measures and high safety rates so they should be given credit growth quotas similar to, or even higher than their domestic counterparts.
Noriyuki Watanabe, general director of the Sumitomo Mitsui Banking Corporation - Ha Noi Branch, said they are hoping that, based on their stability and high safety ratio, the State Bank of Viet Nam would include them in the group of healthy banks and allow a credit growth rate of over 20 per cent.
At present, the central bank has allocated credit growth rates of between 15 and 17 per cent for domestic banks with a healthy performance record. To be fair, it should allow foreign banks to have similar growth rates, some analysts argue.
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