According to Bloomberg news, in the first five months of 2019, the US dollar syndicated lending activity in Vietnam market was about $2 billion. Although this level was not too high compared to the average level in Southeast Asia, it was also a remarkable growth of 119 percent compared to the same period of 2018 if only considering the foreign capital in the domestic market.
Bloomberg experts said that in the context of stressful trade war between the United States and China, foreign capital markets in Vietnam, especially the syndicated loan market, were interested in developing by many financial institutions and commercial banks. The fact that large foreign enterprises shifted their production facilities to Vietnam entailed a series of international financial institutions and foreign banks to cooperate with domestic commercial banks. Through co-financing loan contracts, these organisations shared profits and fully exploit market segments.
In fact, as of the end of 2018, the total amount of syndicated loans in Vietnam reached about $3.6 billion. In addition, a series of domestic commercial banks had been taking full advantage of foreign capital from international financial partners. For example, from the beginning of 2018 until now, banks such as Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank), Saigon Hanoi Commercial Joint Stock Bank (SHB), Orient Commercial Joint Stock Bank (OCB), Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), etc. had in turn become the focal point for disbursing capital for general loans worth several hundred million US dollar due to the organisations hands like JPMorgan Chase Bank, IIB, IBEC, IFC, Deutsche Bank, etc. to pour capital.
According to financial experts, when foreign financial institutions provided and arranged loans for co-financing contracts, domestic commercial banks themselves improved their brand and position in the market. In addition, domestic banks cleared most of the medium and long-term capital pressure, and at the same time benefited significantly from the common loans worth trillions dong.
For example, in the case of Techcombank, this bank used quite a good amount of loans with foreign capital to lend to enterprises of VinGroup. Accordingly, only VinGroup had long-term debt of $1.1 billion at Techcombank and Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank).
With domestic enterprises, many banks strengthened loan contracts for co-financing and created more transparency in the process of appraisal and approval of disbursement. In fact, for build-operate-transfer (BOT), Build-Transfer (BT) projects and large-scale real estate projects, having multiple appraisers would share the maximum risk in the stages of approval and provision of overdue debts.
The loan contracts directly connected with businesses created favourable conditions for businesses to arrange capital for stages such as site clearance, purchasing materials and limiting the total investment. For example, a $400 million long-term loan from six foreign commercial banks of Phu Hung Khang Development Company Limited (HCM City, August 2018) or a 220 billion dong loan case of FLC Group with ICBC in Q4/2018, etc.
Meanwhile, loans such as loan contract of $100 million between International Finance Corporation (IFC) and TPBank, $185 million contract signed between Cathay United and ICBC with Vietnam International Commercial Joint Stock Bank (VIB), etc. would be an important financial resource for domestic banks to expand long-term credit for SMEs and individual customers through digital financial services.
These capital arrangement activities showed that in the context of a strong shift in the commercial market, domestic commercial banking system quickly welcomed foreign capital sources. The willingness of domestic banks to cooperate and share profits through syndicated loan contracts and co-financing contracts with foreign partners showed that the competitiveness of domestic commercial banks improved quite strongly.
Financial experts forecast that the syndicated loan transactions in Vietnam market would be a lucrative and attractive market for domestic credit institutions and the number might not stop at $3 billion to $4 billion per year as last time.
