Local banks unease as property prices down, trading frozen

Local banks are unable to sit still near the property loan collection deadline as the property market is going down, the local newswire VnMedia reported June 2.

There’s only one month left till June 30, 2011 when all the banks must pull down outstanding loans for non’manufacturing factors (property, securities, and consumption) to 22 percent of total loans. However, local lenders have been struggling in collecting property loans and even selling off collaterals to make up for the loan default.

Nguyen Trong Ky, Techcovina’s deputy general director said frozen real estate market poses risks to not only investors but also to local lenders, adding that if the market continues to go down and liquidity goes worse, the banks likely won’t be able to sell off collaterals and take money back.

Buyers couldn’t afford to buy houses as they struggled to access to bank property loans, partly making real estate trading sluggish, experts said. Meanwhile, investors were unable to sell property for loan repayment, forcing real estate prices to go down further.

Sharing the same view point, Nguyen Thi Mui, an economist said most risks will expose to small lenders whose non’production loans make up about 40’50 percent of total loans, making it very hard for them to meet the deadline of property loan collection.

As of December 31, outstanding property loans of the whole banking system were estimated at VND228 trillion, up 23.5 percent on year and making up about 10 percent of total loans, according to the State Bank of Vietnam (SBV). – Stoxplus.com

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial