Banks also 'have red eyes' looking for borrowers

Credit growth in recent times has been low compared to the same period in previous years. According to many banking experts, the reasons are due to reduced credit demand, capital absorption capacity of enterprises and economic difficulties. Some customer groups have demand but have not met the loan conditions or are still entangled in legal procedures.

Many synchronous policies are needed to stimulate consumption.

• The economy is very difficult, consumer demand is weak

Many bank leaders said that banks are also under pressure to increase credit growth, linked to KPI (Key Performance Indicators), but even after searching with all their might, they can only find very few customers who meet the criteria for loans.

Mr. Le Ngoc Lam, General Director of BIDV said: In the first 5 months of the year, BIDV's credit growth was about 5.5%, higher than the average of the banking industry of 3.17%; capital mobilization achieved a growth rate higher than the average in the banking system; credit quality indicators were also controlled.

“Although customers are facing many difficulties, following the direction of the Government and the State Bank of Vietnam (SBV), BIDV has accompanied businesses to overcome these difficulties. After 3 times the SBV reduced the operating interest rate, BIDV has reduced the deposit and lending interest rates. In addition, BIDV also implemented Circular No. 02/TT-NHNN of the Governor of SBV, the subjects considered for debt restructuring and maintaining the debt group are customers facing difficulties in production and business activities and having difficulty repaying loans for living and consumption purposes,” said Mr. Le Ngoc Lam.

According to BIDV leaders, the difficult economy has also had a significant impact on the banking industry. Businesses face difficulties first, and the banking industry is affected, usually 3-6 months later. Since the end of 2022, businesses have seen a decrease in orders, so credit demand in the first months of this year has also decreased.

“The banking industry is an intermediary that receives people's deposits. People come to deposit money at banks, banks are not allowed to refuse. Receiving deposits but not lending them out will make business ineffective and cause losses. Banks want to lend to bring efficiency. Due to weak economic demand, people's incomes decreasing, capital absorption is too low, so the demand for loans has decreased sharply, for example, consumer purchases, housing investment, and the real estate market is sluggish. BIDV also hopes that in the coming time, interest rates will continue to decrease, stimulating investment and consumption needs of businesses, but there will also be a delay for some time,” BIDV leaders worried.

Emphasizing the difficult economic situation this year, Mr. Tran Minh Binh - Chairman of the Board of Directors (BOD) of VietinBank said: VietinBank is very proactive in implementing the policies of the Government and the State Bank of Vietnam to proactively regulate and reduce mobilization and save costs. "The implementation of the 2% interest rate support policy according to Decree 31/2022/ND-CP is facing many difficulties, but in the banking system, VietinBank is considered to be the best supporter".

Currently, VietinBank's business performance is still according to plan and expectations, but in May 2023, difficulties have been revealed. In the first 5 months of the year, the bank's total assets reached VND 1.82 million billion, up 0.7% compared to the end of 2022; outstanding credit reached VND 1.34 million billion, up 6% compared to the end of 2022. If the outstanding credit of the whole industry increases by more than 3% compared to the end of 2022, VietinBank has doubled the credit growth of the whole industry. The credit portfolio is all disbursed in the right direction of the Government and the State Bank, lending to the processing, manufacturing, production and business industries and 5 priority sectors; the bad debt ratio is well controlled.

According to many banking experts, the banking market currently has more than 100 credit institutions, so competition is quite fierce, with many sellers. If a business cannot borrow capital from this bank, it can access capital from another bank, but the business must meet the conditions according to the standards of the banking industry.

According to Deputy Governor of the State Bank of Vietnam Pham Thanh Ha, the banking system is trying very hard to find customers to boost credit growth but still faces common difficulties that are slowing down credit growth. By the end of May 2023, credit reached VND12.3 million billion, an increase of 3.17% compared to the end of 2022.

Of which, State-owned commercial banks (SCBs) account for about 44% of the credit market share but credit growth has only reached about 35% compared to the level assigned by the State Bank; the group of joint-stock commercial banks has increased by about 50% compared to the level assigned. Thus, both of these groups (accounting for the majority of the credit market share) still have a lot of room for growth in the remaining time of this year.

Looking back at the same period in 2022 (up to the end of May 2022), credit increased by approximately 8% compared to the end of 2021. Thus, under the condition that the State Bank's credit policy management remains unchanged (the credit growth target in 2022 is 14%, this year it is slightly higher, from 14% to 15%), but credit growth is so low, it is clear that the economy's capital absorption capacity is weak, significantly weaker than last year.

Deputy Governor Pham Thanh Ha gave three main reasons: First, for manufacturing enterprises, product consumption is difficult due to lack of orders, leading to a decrease in demand for new loans for production; second, for small and medium enterprises, some enterprises have a weakened financial situation, do not have a feasible plan, leading to not meeting the bank's loan requirements; third, related to real estate credit, many real estate projects are facing difficulties, mainly legal difficulties, few new projects are implemented, so the demand for credit for real estate also decreases.

• Banks continue to launch loan packages and reduce interest rates to stimulate demand

Speaking to Tin Tuc newspaper, Mr. Ho Nam Tien - General Director of Lienvietpostbank (LPB) said: Reducing interest rates and supporting businesses at this time is very necessary. LPBank commits to continue to be proactive and pioneer in accompanying the Government.

According to Mr. Ho Nam Tien, in less than a month, LPBank continued to reduce interest rates for the third time. Currently, LPBank has allocated VND8,000 billion to implement a preferential interest rate program for short-term production and business loans for individual and corporate customers with preferential interest rates from only 7.5%/year. LPBank has developed a preferential policy to reduce loan interest rates with a limit of VND5,000 billion for corporate customers and VND3,000 billion for individual customers.

“The lending interest rate for corporate customers is from 7.5%/year and for individual customers from 8.5%/year. This is also one of the timely policies of the Bank to accompany the State Bank to remove difficulties for businesses, especially those businesses that need short-term loans to serve production and business, especially in the context that many businesses have to borrow capital at interest rates above 10%,” Mr. Ho Nam Tien shared.

In addition to adjusting the lending interest rate, the Bank also implemented many solution packages to provide flexible financial solutions for customers. LPBank officially launched the product "Super fast loan for production and business within 24 hours" with the outstanding advantages of the product being the credit notification time within 24 hours, extremely simple and flexible application procedures.

"We will continue to direct organizations to implement this policy to support existing loans to businesses. As for new loans, banks will continue to actively lend to eligible customers. Obviously, the banking system mobilizes capital to lend, so eligible customers will certainly have access to credit capital," Deputy Governor Pham Thanh Ha said.

In addition to solutions from the banking sector, Deputy Governor Pham Thanh Ha said that solutions to increase economic demand are very important. Therefore, ministries and sectors need to continue to promote policies to support businesses, develop small and medium enterprises, promote, search, develop, and remove difficulties in the consumer market and real estate market, thereby removing difficulties for businesses as well as improving financial capacity and improving access to credit.

The State Bank of Vietnam will continue to direct the commercial banking system to reduce operating costs in order to continue to lower interest rates and share profits with businesses; restructure debts, and amend some points of Circular 39/2016/TT-NHNN regulating lending activities of credit institutions and foreign bank branches to customers in the direction of "being more open but not lowering standards".

General Secretary of the Vietnam Banking Association, Mr. Nguyen Quoc Hung, once shared: The State Bank needs to continue to support liquidity for banks through increasing open market instruments (OMO)..., prioritizing meeting the maximum capital needs of banks through the OMO channel. Thereby reducing the pressure on banks' high liquidity reserves, contributing to reducing interbank transaction interest rates as well as reducing interest rates mobilized from customers.

In the long term, it is necessary to amend and supplement a number of legal documents such as Circular 39, Circular 22, draft Law on Credit Institutions (CIs) amended... to soon promulgate and complete the legal framework for CIs to operate stably, healthily and effectively.