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Foreign banks seek fair credit growth policy

Update: February, 27/2012 - 10:13

by Thien Ly

With the confidence of satisfactory business results in 2011, many foreign credit institutions in Viet Nam have proposed that the State Bank of Viet Nam to loosen the credit growth policy for them, suggesting a rate of least 17 per cent, equal to those of domestic banks.

Market shares held by foreign credit institutions including branches of foreign banks in Viet Nam now represent a modest 11.3 per cent of the domestic banking market. The credit growth rate for this sector is not very high either.

According to the State Bank of Viet Nam (SBV)'s branch in HCM City, home to a majority of the foreign banks in the country, outstanding loans of foreign banks in 2011 was just 7 per cent. However, they have great potential to increase credit growth since they operate effectively with very low bad debt rates.

This can be seen in last year's performance, where domestic credit institutions struggled while foreign banks in Viet Nam achieved relatively good business results.

The HCM City SBV branch says that by October 2011, Return On Assets (ROA) and Return On Equity of foreign banks in the country averaged 0.16 per cent and 6.9 per cent, respectively.

The Hong Kong -Shanghai Banking Corporation (HSBC) Vietnam Ltd. is an example. Its General Director, Sumit Dutta, said that in the first six months of 2011, the bank's pre-tax profit stood at US$82 million, up 116 per cent compared with the same period in 2010.

The General Director of Australia-based ANZ Vietnam, Tareq Muhmood, also said that 2011 was a successful business year for the bank.

A foreign bank representative in Viet Nam, who declined to be named, said that the current credit growth limit was too low for his bank.

He said most foreign banks in Viet Nam were healthy because of good risk control measures and high safety rates so they should be given credit growth quotas similar to, or even higher than their domestic counterparts.

Noriyuki Watanabe, general director of the Sumitomo Mitsui Banking Corporation - Ha Noi Branch, said they are hoping that, based on their stability and high safety ratio, the State Bank of Viet Nam would include them in the group of healthy banks and allow a credit growth rate of over 20 per cent.

At present, the central bank has allocated credit growth rates of between 15 and 17 per cent for domestic banks with a healthy performance record. To be fair, it should allow foreign banks to have similar growth rates, some analysts argue.

State-owned sector to cut costs

Many State-owned groups and corporations are striving hard to cut business and production costs by between 5 and 10 per cent as required by the Government's Resolution No 01/NQ-CP issued last year.

The resolution reflects the Government's view that cutting business and production costs and improving efficiency is a crucial measure that state economic groups and corporations must take to ensure their survival in difficult economic conditions that are expected to continue in 2012 and beyond.

The national power utility, Electricity of Viet Nam (EVN), is an example. The group has committed to cut 5 per cent of its costs in purchasing raw materials and services, organising conferences and seminars and other management expenses this year, saving an estimated VND162 billion (US$7.78 million).

In addition, EVN is also expected to save VND330 billion (US$15.85 million) by cutting 0.2 per cent of power that the group uses for production activities.

The group will also call for consumers to cut power consumption by 1 per cent, or 1 billion of kWh, whose production costs are estimated at VND1.3 trillion ($62.439 million).

Meanwhile, general director Nghiem Van Bang of the Housing and Urban Development Corporation (HUD) said they plan to cut management costs by VND125 billion (US$5.9 million) and increase profit from VND1.98 trillion ($94.2 million) to VND2.1 trillion ($100 million) this year.

In 2012, the Viet Nam National Shipping Lines (Vinalines) will focus on cutting between 1 and 5 per cent of production and operational costs, covering the purchase of raw materials, maintenance of machinery and equipment, and other expenses.

Its member companies also plan to cut their management costs by 5 to 10 per cent, and save an estimated VND105 billion ($5 million).

Vinalines general director Nguyen Canh Viet said that the group has already set a target of transporting 39.7 million tonnes of cargo, a year-on-year increase of 8 per cent. It targets a total turnover of VND27 trillion ($1.28 billion) and VND120 billion ($5.7 million) in profits this year.

The Viet Nam National Coal-Mineral Industries Holding Corporation (Vinacomin), meanwhile, aims its cost cutting activities to save VND150 billion ($7.1 million) this year.

Experts say such cost-cutting efforts by State-run groups and corporations would significantly help in reducing public spending and investment, thus limiting the State's financial burden.

Improved business efficiency of the State-owned sector will also have a positive impact on the country's economy, they add.

HCM City mulls buying unsold flats

The HCM City administration is considering buying unsold apartments from commercial projects in the city to supplement its resettlement housing fund.

The HCM City Real Estate Association (HOREA) explains that the city is implementing a resettlement plan for households forced to evacuate by key projects like the Thu Thiem New Urban Area, the East-West Highway and Northwest Cu Chi urban Area and that, to realise it, it needs at least 30,000 apartments.

However, a resettlement housing project will take a couple of years at least to complete from site clearance to infrastructure construction. Meanwhile, property companies have a large stock of unsold housing products.

According to a data compiled by a market research company, as of the end of 2011, the number of unsold apartments in city-based projects was nearly 20,000.

Under the plan being considered now, the city would look to purchase mid-sized apartments of 40 and to 70sq.m each to meet this demand.

HOREA chairman Le Hoang Chau said that the city administration's plan would ensure profit for project owners, and there is a high possibility that this policy will be implemented.

However, independent market analysts worry that the city's purchase of real estate developer's unsold departments would not be an easy business to carry out.

This is because the city will require eligible projects to be audited before deciding to purchase them while the costs of most of the apartments typically include expenses not accounted with necessary receipts and documents.

Meanwhile, real estate developers would only sell their apartments when all costs for land, labour, material, equipment, financing, services, utilities plus overheads and contractor's profits are all covered.

International retailers

Many international retailers are contributing to promoting Vietnamese goods globally by launching them in their stores worldwide.

These include food, clothing and handicraft items.

Nguyen Xuan Hai, southern director of Big C supermarket chain, said his company last year exported Vietnamese fabric, food and groceries to nine countries under the umbrella of the Casino Group, which is the investor in the Big C chain in Viet Nam.

The chain earned US$10 million by exporting made-in-Viet Nam-food items, while similar sales of fabric and groceries generated US$8 million and US$3 million respectively, he said.

Lotte Mart has launched 89 brands belonging to 31 local firms at its 97 supermarket outlets in South Korea. These include Trung Nguyen coffee, Hung Phat tea, Vinamit and Bibica confectionery.

Lotte Mart's export volume has surged 20-25 per cent, while revenues have jumped 30-40 per cent. Lotte Mart also plans to bring Vietnamese products to 94 supermarkets in China and 28 stores in Indonesia in the coming time.

According to retailers, the export of Vietnamese goods is going smoothly as the products meet technical standards of importers.

The retailers usually provide support in providing export information for local enterprises, receive goods at ports and take charge of distribution. However, they advise Vietnamese firms to pay importance to ensuring punctual delivery of orders. — VNS

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