Central bank target seems out of reach for banks
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Commercial banks in Ho Chi Minh City are expected to reduce their outstanding loans to non-production sectors, especially property, to 22 percent of their overall loans by the end of next month.
However, property developers are unable to sell their products to repay bank loans.
The general director of a minor joint stock bank in District 1 said his bank stopped lending in late February and is focusing on collecting real-estate and consumer loans after managing to keep loans for at 1 percent of its total outstanding loans.
It is not difficult to collect consumer loans since they are mostly given to salaried people and the amounts involved are not large, he said. But loans to the property sector are a different kettle of fish, he explained, since developers are unable to sell their products in the stagnant market while mortgages are usually for 10 years or more.
The chairman of another minor joint-stock lender said since loans to non-production sectors account for 40 percent of outstanding debts, it would not be easy for his bank to lower this rate to 22 percent by the end of June as mandated by the State Bank of Vietnam.
According to the central bank, some 24 banks have outstanding non-production loans of 25 percent or more. For some, it is as high as 45 percent.
If these banks cannot cut the rate to 22 percent by June 30, their compulsory reserve ratio will double and business operations will be restricted in the second half and in 2012.
The general director of a joint-stock bank with 35 percent non-production loans said many banks are trying to achieve the target by suspending loans for securities, real estate, and consumption and lending for production.
However, the central bank has also ordered banks to keep overall credit growth this year at 20 percent or less.
Bank after bank reported similar problems in achieving the targets set by the central bank.
Property market woes
“To raise money to repay bank loans, investors must be able to sell their products or even projects,” Nguyen Van Duc, deputy director of Dat Lanh Real Estate Company, said.
“But they cannot now.”
The property market is frozen with even mid-priced apartments not being bought even when developers are offering them at cost prices.
Tran Minh Hoang, chairman of Vietnam Land Investment Corporation, said most apartment buyers also hope to get bank mortgages while banks have shut the door on them.
Le Chi Hieu, chairman of Thu Duc Housing Development Corporation, warned many real-estate projects would be delayed or suspended, causing a major setback to the market’s recovery.
