Vietnam banks race to recover property loans, cut non-production credit to 16pct before Dec 12

Not only limiting new loans, many banks are also attempting to recover their due loans from real estate projects, local newswire VnExpress reported on November 1.
In an interview with VnExpress, Nguyen Duc Huong, Vice President of LienViet Post Bank, said after the issuance of central bank Directive 01 on tightening credit control, his bank did not cash in new property projects any longer though the room of his bank’s credit growth remains.

Regarding the reduction of non-production outstanding loans down to 16% (including property), Huong said that LienViet Post Bank will focus on debt collections, so the lender is capable of fulfilling this goal.

With credit for real estate projects, he said the debt ratio remains within the safety threshold. About 100 billion of loans for Petroleum Real Estate Company (which has announced plans to sell off real estate to repay banks including LienViet Post Bank), Huong said the bank has devised measures to settle, ensuring no effect on its bad debts.

Director of a Hanoi-based bank branch revealed, in addition to recovering due real estate loans, new loans for this sector seems to be almost in “red light”. A few months ago, this director also had the right to make decisions to lend some billions of dong to this industry. Now, all lending decisions that involve high-risk sectors such as real estate, securities and the like shall be submitted to the president of credit council of the bank for approval. He said: “In fact, this also means the ability to borrow property-backed loans is zero.”

General Director of Orient Commercial Bank (OCB) – Trinh Van Tuan said, as soon as Directive 01 was issued, had this bank planned to reduce outstanding loans to non-manufacturing sector by squeezing loans and almost no new loans disbursed. To date, the non-production loans of OCB are estimated to have reached about 16% of total outstanding loans. If this ratio is low again, OCB will consider new lending contracts including of real estate but need very rigorous reviews.

Pham Quang Tung, Deputy General Director of Bank for Investment and Development of Vietnam (BIDV), said that before June 30, the proportion of this bank’s non-production loans was still below 16%, lower than compared with that prescribed by the State Bank. However, it would appear that this lender almost did not put new capital for real estate loans, but it focused more cash on business production and export.

In debt collections, although he did not mention how much the ratio was, BIDV deputy general director said there were some real estate loans that needed restructuring. Several debtors have been moved in worse debt groups due to difficulties of the market during the past times.

Among major banks, Agribank is the bank with the highest rate of bad loans at 6.67% of total loans which according to Chairman of Agribank Nguyen Ngoc Bao, are mainly located in real estate areas for 2008-2009 projects. Therefore, with new loans in this sector, this bank is extremely cautious, and is mainly going for debt recovery.

Currently, non-productive loans of banks have still accounted for over 30% of the loans, in which many loans are medium-and long -term. “To be able to bring the non-production loans ratio to 16% prior to December 31 is a too hard task for banks,” bankers confided. – Source: Vietbiz24.com

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial

Posted by VBN on Nov 3 2011. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry