Lending drive reconciles banks to losses
Lending drive reconciles banks to losses
Under pressure to achieve their growth targets, many banks are now ready to take losses to boost lending and are offering loans at very low interest rates, according to analysts.
State Bank of Viet Nam data shows that the banking sector achieved credit growth of 3.52 per cent as of June 30.
But the central bank remained determined to pursue a target of 12-14 per cent for the year, Nguyen Thi Hong, director of its Monetary Policy Department, said.
The analysts said this put banks under great pressure to push up credit activities even at the likelihood of making losses.
SeABank, for instance, which achieved credit growth of 6 per cent in the first half, has slashed lending rates to attract borrowers.
Its general director Dang Bao Khanh said the bank offered long- and medium-term loans at just 6 per cent interest for the first six months.
"The bank also has several other credit packages with interest rates that could cause a ‘shock' to customers.
"Between April 1 and June 29 the first borrowers could enjoy a zero interest rate for the first 12 months.
"With such low interest rates, the bank will make a certain loss from new loans."
But the rate cut was imperative since banks found it very difficult to lend now, especially to well-performing companies, which are the target of most banks, he said.
OceanBank recently earmarked VND2 trillion (US$94.14 million) for companies that want to bolster their working capital at an interest rate of just 7 per cent for the first three months.
ABBank has joined the race, offering personal loans worth VND1 trillion ($47.07 million) at 8.5 per cent for the first 12 months.
LienVietPostBank is prepared to lend VND2 trillion for various terms at interest rates starting from zero per cent.
A bank executive in HCM City, who asked not to be named, said to attract borrowers many banks were ready to lend at 6 per cent or even 5 per cent. Meanwhile, the interest rates on deposits of 12 months or more were 7-8 per cent.
"This means that the banks are making losses," he said.
"Some companies are taking advantage of the interest rates difference to make profits: They borrow from this bank and deposit the money at another bank.
"This phenomenon is not good for the economy since … the money is not pumped into the economy."
The analysts said the banking sector faced a difficult task in achieving the credit growth target because demand was very low.
Interest rates were not a central factor in deciding credit growth, they said, adding that the growth relied on the demand and enterprises' ability to absorb capital.
OceanBank deputy general director Vu Nhat Lam concurred, telling Business Times newspaper that whether or not capital can be pumped into firms "depends on the efforts of both the banks and enterprises."
"The former need to simplify lending procedures and the latter must prove their capacity to use the money effectively and earn profits."
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