Customers borrow loans at a branch of VPBank. — VNA Photo

by Thiên Lý

This year 17 commercial banks had planned to increase their capital, but only two managed to do so.

Bắc Á Bank and VPBank have respectively increased their prescribed capital from VNĐ4.4 trillion (nearlyUS$200 million) to VNĐ5 trillion (nearly $250 million) and from VNĐ8.056 trillion ($400 million) to VNĐ9.18 trillion ($450 million).

What about the others?

Vietcombank has successfully negotiated with Singapore’s GIC Special Investments to sell a 7.73 per cent stake to increase its charter capital, but is waiting for approval from authorities.

Another State giant, BIDV, also plans to sell shares to foreign investors to increase its capital, but has revealed no information about the strategic investors.

Vietinbank, also State-owned, has made no headway either due to various reasons. The bank’s management said it was considering other measures to speed up the task of increasing capital and expects approval from the Government and central bank. 

DongABank has postponed plans for hiking its charter capital from VNĐ5 trillion to VNĐ6 trillion and in fact had to refund money to people who had already bought new shares since it could not go ahead with a planned share issue due to lack of interest.

The banks’ inability to increase their charter capital means their capital adequacy ratio (CAR) will not improve, and as a result their credit growth will not be allowed to exceed the current 17 per cent unlike in previous years when it went up to even 25 per cent.

This curb on credit activities will obviously hit their profits and, as a result, dividends and tax payments.

With the year’s peak business season approaching banks are peeved they are unable to improve their CAR.

According to the State Bank of Viet Nam, in the first nine months of the year banking credit growth was 10.64 per cent. The target for the year is 18-20 per cent.

However, the average CAR of banks is around 9 per cent, low enough to set off alarm bells at the central bank.

Unable to increase their capital by selling shares, some banks have asked the central bank to allow them to retain their earnings without paying dividends to increase their capital, but it has yet to give them approval.

Analysts said the central bank should consider their demand.

Enabling them to increase their capital one way or the other is of significance since it would enable them to apply international governance standards, which would be a decisive factor for credit growth amid the global integration process.

City expects strong remittances

According to the State Bank of Việt Nam’s HCM City branch, remittances worth US$2.4-2.5 billion are expected to flow into the city in the last quarter of the year, bringing the total for the year to an estimated $5.7-5.8 billion.

Remittances have been growing at 10-15 per cent on average a year in recent years.   

Analysts have hailed the role of remittances in the socio-economic development of both the city and the country, saying they have become an important source of capital and foreign exchange.

The rapid increase in remittances is attributed to many reasons, including the number of Vietnamese who work and live abroad.

They are encouraged to invest their money in Việt Nam thanks to the consistent improvement in Government policies and the legal framework.  

The liberal foreign exchange management policies have also created favourable conditions for overseas Vietnamese to easily transfer their money to the country.

For instance, the procedures for getting a licence to provide remittance-related services have been significantly simplified, thus enabling the services to rapidly develop.

As a result, overseas remittances can be easily transferred to receivers through the banking system or even delivered to their home.

Remittances are also flowing in because of the Government’s new policies for overseas Vietnamese. For instance, it allows overseas Vietnamese -- and foreign nationals -- to buy houses in Việt Nam.

Some analysts also said the strong recovery of the housing sector encourages overseas Vietnamese to invest in Việt Nam, thus increasing remittances.

To ensure the flows remain steady, it is necessary to have policies to help overseas Vietnamese invest profitably in Việt Nam, including by setting up businesses, they said. 

Housing market slows but expected to pick up

Though the real estate market is said to be in a rather strong growth phase, it is still showing signs of slowing down and some unstable aspects, which could badly affect it if they are not addressed in time.

This judgment is based on the decrease in the number of successful transactions in the country’s two biggest markets, Hà Nội and HCMC.

In September, for instance, the number of transactions was respectively 1,100 and 1,050, down from 1,200 and 1,160 in August.

One severe limitation in the market is an oversupply of high- and medium-end apartments and a shortage of products that most people can afford. 

Some analysts attributed the market slowdown to certain changes in policies by the State Bank of Việt Nam (SBV), especially its hike in the risk index for lending for property and securities from 150 per cent to 200 per cent.

It also lays out a roadmap for reducing the cap on medium- and long-term lending using short-term funds from 60 per cent to 40 per cent.

The VNĐ30 trillion housing stimulus package launched in June 2013, which offered loans at a maximum interest rate of 5 per cent to individual borrowers for a 15-year tenor, ended in June this year. This has made many low-income earners who had hoped to buy houses rethink their plans.

Prospective buyers thus worry about the availability of money and have become more hesitant to enter the market.

The recent increase in the prices of many real estate products and the strong return of investors in secondary properties have also contributed to volatility in the market, affecting affordability and thus liquidity year.

Yet, despite the slowdown, analysts predicted the market to become more competitive in the final months of the year since supply of high-end apartments exceeds demand.

In the third quarter the supply of apartments in the Hà Nội and HCMC markets increased sharply, with nearly 15,000 offered for sale, of which high- and medium-end apartments accounted for 50-60 per cent, according to Việt Nam Real Estate Association.

The association also said thousands of new luxury apartments would come into the market by year-end but housing for low-income earners would be limited. Meanwhile, demand is predominantly for social housing.

All this is likely to cause an oversupply of luxury apartments, thus sparking fierce competition. 

The main reason for this skewed situation is unplanned development, which was the main cause of the bubble that formed some years ago before bursting and leaving the market in tatters, according to experts. — VNS