The governor of the State Bank of Vietnam has warned of risks as HCMC banks have boosted lending to the real estate, securities and consumer goods sectors this year.

Mr. Le Minh Hung

Le Minh Hung told a working session between Prime Minister Nguyen Xuan Phuc and HCMC leaders on Monday that the amount raised by HCMC-based banks has made up nearly 30% of the total in the national banking system and their outstanding loans have accounted for some 27% of the system’s total.

Local credit institutions have reported positive results in the January-June period, with deposits jumping 5.8% versus the end of 2015 and reaching a three-year high. Their lending has increased by 6.8%, above the nation’s average.

The city’s bank-business matching program has performed well. Lenders have committed to providing VND200 trillion (US$8.95 billion) in loans for corporate clients, with nearly VND67 trillion of it disbursed.

Corporate borrowers participating in the program can enjoy an interest rate of 7% per annum for short-term loans and 9% for medium to long-term credits. Outstanding loans for the agricultural sector have totaled around VND50 trillion.

However, Hung pointed out some problems with the city’s currency and credit operations in the period. Short-term loans in the city still make up a big proportion, while loans for the real estate, securities and consumer goods sectors have grown strongly this year, exposing the system to risks, Hung said.

The governor said the central bank has given guidelines to banks, especially in HCMC, to strengthen supervision and improve credit safety.

Banks in HCMC have reported a higher bad debt ratio than the nation’s average. Therefore, they must continue restructuring to secure healthy operations, Hung added.

According to a report of the authority of HCMC, local lenders have posted positive mobilization and credit growth.

Local banks have mobilized VND1,658 trillion by the end of June, up 5.8% versus the end of last year, and 17% year-on-year. Dong-denominated deposits have outpaced those in foreign currency and accounted for over 86% of the total.

Meanwhile, total outstanding loans are estimated at nearly VND1,320 trillion, up 16.4% year-on-year.

The bad debt ratio of banks in HCMC was 4.47% at the end of April, rising 55 basis points against late 2015.

Banks have also cut lending rates to help more enterprises access capital and channeled credit into business and production activities.

SGT