Local lenders start squeezing property loans

Local lenders have stepped up to squeeze property loans in an effort to cut nonproduction loans to 22% from 25% of total outstanding loans by June 30 this year and ensure credit growth of below 20% in 2011, the online newspaper Dau Tu reported.

Ocean Joint Stock Commercial Bank (OCB) is mulling stopping securities and property loans as a part of its loan restructure, said Trinh Van Tuan, the unlisted lender’s general director.

As of March 31, 2011, nonproduction loans account for 35% of OCB’s total outstanding loans, mostly attributing to private property loans, Tuan added.

“With the policy of fastening real estate loans this year, local commercial banks will struggle to boost up consumer lending, as property loans contributed mostly to outstanding loans for individuals”, said Tran Phuong Binh, Dong A Bank’s General Director.

Asian Joint Stock Commercial Bank (ACB) is also skeptical ahead of Government tightening policy, although the listed lender only focused on private property loans instead of those for investments, the local media reported.

Sacombank’s CEO Dang Van Thanh said the lender is also restructuring their loans in favor of lending to effective property projects, and advising their borrowers to delay the loans till 2012 in an effort to drive capital flows to production.

Currently, outstanding loans for non production are making up about 35-44% of total outstanding loans at some commercial banks.

Local lenders were requested to reduce non production loans including real estate and stocks in their loan structure to at most 22% by June 30 and 16% by December 31 this year, said the State Bank of Vietnam in a document released in March 1.

The SBV also cut the target of credit growth to under 20% from previous 23%, and money supply growth to 15-16% from 21-24%, requiring local lenders to set up suitable business strategies to achieve above-mentioned targets. – Stoxplus.com

Tags: property loans, Vietnam banking industry, Vietnam finance, Vietnam financial