By Thiên Lý 

Recently the State Bank of Việt Nam told credit institutions to restrict loans to real estate projects to reduce risks and credit concentration in a single sector.

The central bank also advised the lenders to limit lending for new housing projects, especially luxury housing and resorts and those with low liquidity. 

It said that reports from some credit institutions show that over the last few months they focused on lending for major property projects.

A report from the central bank shows that in the first half of the year credit to the housing sector reached a total of VNĐ415.44 trillion (over US$18 billion), up 32.92 per cent as compared with the figure recorded in early 2014, and 5.76 per cent up from the end of last year.

Lending to industrial parks was estimated at VNĐ12,744 billion (US$556.6 million), while loans for construction of urban areas and office buildings were respectively worth VNĐ76,947 billion and VNĐ31,387 billion.

However, loans for real estate trading accounted for the largest share - VNĐ89,306 billion.

Although the central bank has not yet reported on the credit growth in the third quarter, it is already estimated that over VNĐ400 trillion (US$17.79 billion) has been pumped into the property sector.

Clearly, lenders remain very keen on real estate and disdainful of the multiple warnings issued by economists and the central bank about the high risks involved.   

A striking aspect of this is that a majority of the money lent to the property sector has come from short-term funds mobilised by the banks.

This violates the central bank’s Circular No.06/2016 that took effect in July reducing the use of short-term funds for medium- and long-term loans from 60 per cent to 40 per cent.

The banks have also ignored another order by the SBV -- that credit institutions should not provide loans exceeding the credit limits– despite warnings that any transgression would be severely punished.

The central bank’s concerns about excessive lending to the property sector is understandable.

According to a Ministry of Construction report, the supply of luxury housing now exceeds those of social houses and low-cost commercial houses though demand for the latter two is higher.

The ministry has predicted that the oversupply of high-end apartments is likely to happen by year-end.

Meanwhile, too much credit has flowed into high-end housing, possibly creating an oversupply of capital in this segment.

Another cause for concern is that the majority of loans have gone to large property enterprises who are big debtors to several lenders. 

As for the banks, why do they put so many of their eggs in the housing basket despite the high risk?

For one thing, they find it easier to find a few large real estate enterprises and lend thousands of billions of đồng to each instead of having to find thousands of small customers to lend the same amount of money.

Analysts said that this behaviour of the lenders is likely to put them in a liquidity trap especially since the real estate market has not really recovered as it promised to.

A liquidity trap refers to a situation in which interest rates are low and savings rates are high, making monetary policy ineffective.  

VN retailers hold their own against foreign rivals

According to data from the General Statistics Office, there are now around 800 hypermarket and supermarkets, 150 malls, 9,000 outdoor markets, 2,000 convenience stores and minimarts, and 1.3 million household stores.

In recent years foreign retailers from various countries and territories have vied with each other to grab a slice of the Vietnamese market pie, including some big names like Thailand’s Central Group, South Korea’s Lotte and Lock & Lock, and Japan’s Aeon.

The entry of these foreign players with deep pockets and tremendous experience has seen Vietnamese retailers face fierce competition.

However, the latest figures show that the Vietnamese remain the main players.

Data from ACB Securities Company shows that Saigon Co.op still leads in retail turnover with its three chains -- Co.opXtra, Co.op Mart and Mini Co.op Food -- and a total of 178 outlets that pulled in revenues of VNĐ25 trillion last year.

Sài Gòn Co.op is also the only Vietnamese company that can seemingly compete with Thailand’s Metro through its Co.opXtra and Co.opXtra Plus chains.

Vingroup is second behind Co.op after rapidly expanding its share of the retail market by acquiring several retail chains.

It bought all nine outlets of Maximark and 100 per cent stake in Ocean retail Group, which had 13 supermarket outlets. It also bought the “79 shop” retail chain from Alphanam Retailer.

As a result, the company’s chain of convenience stores under the Vinmart or Vinmart+ brand names expanded from 320 outlets at the end of last year to 825 by June this year.

Vingroup also owns three mega malls, 10 shopping centres (Vincom Center) and 74 supermarket (Vinmart and VinPro/VinPro+) outlets.

Satrafoods should also be mentioned here since it has 80 shops with the Satra brand name, 58 convenience stores named Ministops, 210 outlets that carry the name Shop&Go and 178 convenience stores (Circle K).

Analysts say Vietnamese supermarkets have still been more favoured by domestic consumers than foreign outlets.

But they say Vietnamese retailers need to focus on improving the quality of goods as well as service if they want to retain their clientele.

In terms of product and service quality and price, Vietnamese retailers cannot match their foreign rivals. Besides, their distribution networks and warehousing less professional.

Businesses pleased as interest rates fall

Phan Thanh Tịnh, director of the Phan Công Plastic Packaging Company based in Đồng Nai Province, said his company had to pay 10 per cent interest for a bank loan last year, but only 8 per cent for a new loan this year.

“Besides, it is much easier to get a bank loan now since banks are vying with each other to find customs.”

Many business executives acknowledge there have been positive changes in the interest rate regime of the banks.

OceanBank, for instance, though in the process of restructuring, offers loans at 5.99 per cent for doing business and buying homes or vehicles.

To slash lending interest rates, many State-owned banks have been cutting deposit interest rates.

Vietcombank, VietinBank, BIDV and Agribank, the big four public banks, have cut the rate on deposits of less than 12 months by 0.3-0.5 percentage points since September 26.

Deposits of three to five months now carry an interest rate 4.8 per cent, while it is 5 per cent for five to six months, 5.3 per cent for six to nine months, and 5.5 per cent for nine to 12 months.   

LienVietPostBank led joint stock banks in adjusting the interest rates to similar levels as the State-owned banks.

Market observers said the banks’ recent changes in both lending and deposit interest rates are owed to the State Bank of Việt Nam’s Directive No.4/CT-NHNN to cut costs to cut lending rates and support production and business activities and the economy.— VNS