“Obviously there will be more difficulties for the banking sector in the later months of this year as credit growth is expected to slow down,” said Doan Van Thang, deputy general director of LienVietBank. Thang said that with the State Bank’s goal to keep credit growth at 30 per cent this year, room for banking system credit growth in the remaining months would be 13 per cent only.
“Meanwhile, the difference in banks’ input and output rates has shrunk, leading to a decrease in marginal profit,” said Nguyen Dinh Tung, Maritime Bank’s deputy general director. To date, there has not been any official document from the State Bank on credit tightening, but the central bank’s intention to tighten credit growth in upcoming months seems clear.
State Bank governor Nguyen Van Giau last week said the central bank wanted local lenders to tighten consumer lending management to prevent capital flows to flood the stock and real estate markets, distorting market signals. “Instead, perhaps they should focus on extending loans to small- and medium-sized enterprises to boost their production and financing to major state-owned projects,” said Giau.
According to State Bank statistics, total outstanding loans by local lenders in the first half of the year have increased by 17 per cent compared to late 2008 and bad debts in the whole system now account for around 5 per cent. Ngo Xuan Dung, chief executive of Vietnam International Bank’s Ho Chi Minh City branch, said earnings from financial investment and the reimbursement of risk standby funds, all of which are added to profit record, would also be lower.
“In the first half of 2009, banks benefited from government bonds and securities trading as the stock market made impressive run-ups from its bottom in February. In addition, the reimbursement of 2008’s risk standby funds, which were quite huge last year due to gloomy economic outlook, also contributed significantly to banks’ six month profit records,” said Dung.
He said these profit sources would not surge in the near future, instead, banks would experience more stable development. Nguyen Phuoc Thanh, general director of Vietcombank, said that the bank was confident it would exceed its yearly profit target, but would not raise its target.
Thang shared the same caution. Vietcombank earlier this month announced that it had fulfilled 74 per cent of its 2009 profit target with six month pre-tax profit recorded at VND2,450 billion ($137.6 million). Meanwhile, LienVietBank also reported VND340 billion ($19.1 million) in pre-tax profit, fulfilling about 70 per cent of the year’s target.
By Quynh Anh
