Banks in Vietnam likely to miss credit growth targets

TN News

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The amount of loans in Vietnam so far this year has been less than expected and many lenders say they will not be able to achieve full-year credit growth targets.

A banker in Ho Chi Minh City said his bank had to tighten lending as it could not raise funds following the central bank's order to cut interest rates.

"Many corporate clients and individuals alike withdrew their deposits," he said, noting that deposits at the bank declined by more than VND2 trillion (US$105.5 million) in the first five months.

The lack of funds means lending has to be restricted and thus it's unlikely for the bank to meet the credit growth target of 25 percent for 2010, he said.

For larger banks, the situation is not much better.

Nguyen Phuoc Thanh, general director of Vietcombank, Vietnam's largest partly private lender in terms of assets, said loans at the bank grew by just 5 percent in the January-May period, much lower than the annual target of 20 percent.

Thanh said it's not easy to get clients now as the production sector has not fully recovered and the government does not encourage real estate and consumer loans.

Many people say businesses don't want to take out loans because of high interest rates, but the real reason is they are afraid they won't be able to sell their products and pay off the loan, he said. 

But experts and central bank officials say they still think the credit growth target of 25 percent for Vietnam this year will be met. Local companies will start taking loans in the third quarter so that they can boost production in the final months of the year, they said.

Tran Hoang Ngan, a member of the National Advisory Council on Monetary Policies, said it is necessary for credit growth to slow now after loans increased by 38 percent last year, even amid the economic downturn.

"It will be reasonable for credit to grow between 20 and 25 percent this year," Ngan said.

Vietnam's banking credit expanded by 7.46 percent in the first five months compared to the end of last year. Deposits grew 7.8 percent, according to the State Bank of Vietnam. 

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