Banks fail to meet credit targets

HA NOI (VNS)— The goal set for credit growth this year was proving hard to reach and banks should shift focus to credit quality, said Pham Hong Hai, managing director, head of Global Banking and Markets HSBC Bank Viet Nam.

Accelerating credit quality was critical for banks to develop, Hai said. He told Thoi Bao Ngan Hang (Banking Times) newspaper that banks should select customers to provide loans, rather than promote credit growth at any cost which had caused bad debts to increase.

Hai said high interest rates were not responsible for low credit growth. Lowering rates would not improve credit growth because low domestic demand was holding back the growth of companies and the need to borrow. In addition, if the bank interest rates were lowered to 8-7 per cent while inflation was rising, Viet Nam dong would be withdrawn to be invested in foreign currencies or gold.

The credit growth target this year of 8-10 per cent would not be fulfilled, he said, forecasting a rate of 6-8 per cent.

"However, it is not a worrying situation," he said.

Nguyen Xuan Thanh, public policy manager at the Fulbright Economics Teaching Programme, said slow credit growth after years of boom was inevitable when the banking system struck difficulties, as had occurred in other Southeast Asian countries. "The economy is regulating itself," he said.

Meanwhile, Trinh Van Tuan, chairman of the Orient Commercial Bank, said bank liquidity should be prioritised.

Investment in Government bonds was the safest choice for both liquidity and profit, although the profit would not be high, Tuan said.

Deputy general director of the Viet Nam International Bank Le Quang Trung said State Treasury had mobilised Government bonds worth VND147.46 trillion (US$7.022 billion) since the beginning of the year, 95 per cent of which were from commercial banks. — VNS