Want to be in the loop?
subscribe to
our notification
Business News
LENDING SLOWDOWN THREATENS TO DELAY REAL ESTATE RECOVERY
Commercial banks are taking a firm grip on lending activities, especially for the real estate sector.
Vietnam has witnessed a downward trend of credit growth in the beginning month of 2024, with lending decreasing by 0.33 per cent against the end of last year, as of March 18.
Phan Duc Tu, chairman of BIDV’s Board of Directors, said, “Over the first 80 days of 2024, BIDV has disbursed loans totalling $18.95 billion to the economy. However, the figure is lower than its debt repayment of $19.55 billion. As of March 11, the bank’s outstanding balance contracted approximately 1 per cent compared with the end of 2023.”
Nguyen Duc Vinh, CEO of VPBank, reported a similar trend. “VPBank has more than 40,000 enterprises, with a credit limit of $9.67 billion. However, currently, only over $2.42 billion has been disbursed due to various reasons,” he said.
Agribank chairman Pham Duc An said, “After the first three months of 2024, Agribank’s income and expenditure gap decreased by $80.6 million compared with the same period last year.”
There are several reasons behind the slowdown in lending. Among them, corporate customers are qualified for loans, but they do not have manufacturing plans or good consumption markets. The collateral mechanism lacks flexibility. Furthermore, there is no guarantee from regulatory bodies when providing loans to businesses suffering losses.
In the real estate sector, the hottest segment for bank loans, debt servicing capacity will remain weak even as cash flow improves due to high leverage and substantial debt maturities in 2024. The sector’s debt/earnings before interest, taxes, depreciation, and amortisation ratio rose to 8.7-fold in 2023 from 7-fold a year ago, as debt growth surpassed profit growth, according to a report released by VIS Rating last week.
The report noted that around $5.24 billion worth of developer-issued bonds are maturing in 2024, the highest level in the last five years. Developers who are embroiled in legal issues and/or speculative projects are the most at risk of poor sales and cash proceeds, weak debt coverage, and defaults, and hence, are most in need of refinancing.
Phan Thi Van Anh, director and senior analyst of VIS Rating, said, “The banking sector’s capital level will generally move sideways in 2024. Only a few banks have announced plans to increase capital. In general, the capital adequacy ratio of the banking sector will remain at a low level of about 11-12 per cent.”
“The bad debt coverage ratio of small- and medium-sized private banks will be lower than the sector’s average. The main reason is that it takes longer to improve the provision ratio after a sharp decline in asset quality in 2023,” she added.
In addition, the State Bank of Vietnam (SBV) has recently drafted a number of amendments to current circulars on operational safety ratios and on lending activities to be consistent with the Law on Credit Institutions.
Nguyen Thu Ha, deputy director of SSI Investment Consulting and Development Center, said, “The amendments show SBV’s determination in keeping a strict management perspective on the lending activities for borrowers whose purpose is to make deposits under land/project transferring contract. Accordingly, the clause on putting such disbursement into an escrow account was kept unchanged in the new draft, opposing developer requests.”
There were also stricter requirements on disclosing related parties in the loan contract to address the issue of related lending activities, Ha added.
“These are in line with our expectations that one of the key focuses of the SBV going forward would be mitigating related lending activities to ensure the system’s safety. Although the purpose of this clause is clear, effective enforcement essentially hinges on both the truthful statements of the borrowers, as well as the time and effort banks spend during the verification processes,” Ha said.
Source: VNS
Related News
VIETNAM’S GDP TO GROW 5.5% THIS YEAR – WB
This forecast is based on the assumption of a moderate recovery in manufacturing exports in 2024, fueled by rebound growth of 8.5% year-on-year in the fourth quarter of 2023 and 17.2% year-on-year in the first quarter of 2024, reflecting strengthening global demand, said Dorsati Madani, senior country economist at the WB in Vietnam.
FARE REFUND FOR VISA REJECTION
Cathay Pacific will offer full refunds for cases of visa rejection to provide you with the confidence to explore the world with ease. If you are planning to fly to a destination that requires an entry visa, you can now book with greater peace of mind.
FOUR COMMODITIES POST Q1 EXPORT VALUE OF OVER 5 BILLION USD
The total export turnover of agricultural, forestry, and fisheries products in the first three months of 2024 is estimated to reach 13.53 billion USD, an increase of 21.8% compared to the same period of 2023.
MOIT PROPOSES SCHEME TO BOOST RENEWABLE ENERGY PROCUREMENT
The proposed Direct Power Purchase Agreement (DDPA) mechanism, outlined in the draft decree, targets organisations and individuals consuming electricity from the 22kV power grid or higher, with a monthly consumption averaging 500,000kWh. However, residential households are excluded from direct procurement.
REAL ESTATE BONDS PLACE PRESSURE ON ISSUING FIRMS
The ministry’s recent report underscores concerns within Vietnam’s corporate bond market for 2023 and 2024. It emphasizes the critical need to address hindrances to the real estate sector in line with the objectives provided in Government Resolution No. 33/NQ-CP, which aims to stabilize the industry.
DA NANG CUSTOMS FOCUSES ON DEVELOPING CUSTOMS-BUSINESS PARTNERSHIPS
Da Nang Customs Department issued an action plan for developing customs-business partnership in 2024. One of the new events this year is the workshop on “Settlement reports for enterprises engaged in outsourcing, export production and export processing” held in Da Nang Customs Department on April 16, 2024.