Survey from Q1/2019 financial statements of 20 banks showed that the average medium and long-term loan ratio of the group was at 54.68%. Although this rate showed signs of a slight decrease compared to the end of the previous year (55.08%), it was still at a high level.
Notably, the ratio of medium and long-term loans to total outstanding loans of private commercial banks was much higher than that of banks with state capital.
At Vietnam International Joint Stock Commercial Bank (VIB), as of the end of March 2019, this bank had more than 85.4 trillion dong of medium and long-term loans, out of the total outstanding of 101.9 trillion dong. Accordingly, the ratio of medium and long-term loans on total outstanding loans was up to 83.81%.
Similarly, medium and long-term loans at Southeast Asia Joint Stock Commercial Bank (SeABank) also amounted to over 64.5 trillion dong at the end of March 2019, accounting for 75.48 percent of the total outstanding loans. This number at Orient Joint Stock Commercial Bank (OCB) was 73.21%, at Vietnam Prosperity Joint Stock Commercial Bank (VPBank) was 66.93 percent and at Saigon-Hanoi Joint Stock Commercial Bank (SHB) was 59%.
Meanwhile, in the opposite direction, banks with state capital were at the bottom of the list when the ratio of medium and long-term outstanding loans to total outstanding loans was much lower than the average of the survey group.
Specifically, the financial statements showed that by the end of the first quarter of 2019, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)’s total outstanding loans were at over 673 trillion dong, up 6.5 percent from the beginning of the year. In particular, medium and long-term loans reached 303.4 trillion dong, up 4.8 percent compared to the beginning of the year, accounting for only 45 percent of total outstanding loans.
Similarly, this rate at Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank) was 44.13 percent and at B Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) was 37.41%.
The long-term loan is attractive to banks because it helps them get higher profit margin, thereby it reinforces the overall profit.
However, this also means that the potential risk for the future system is greater. The longer the loan term is, the higher the risk is, especially in the condition that the proportion of short-term capital still accounts for most of the mobilised capital structure in general.
On the other hand, the credit institutions’ supplementation of medium and long-term capital for the economy is contrary to the trend and role of the banking system.
For a developed market, the main function of the banking system is short-term lending and working capital financing. Medium and long-term capital needs are mainly due to the capital market.
However, in Vietnam, medium and long-term capital needs of enterprises to expand and develop production and business are huge. The capital market is not fully developed in both size and quality in order to meet this demand.
According to Dao Minh Tu, deputy Governor of the State Bank of Vietnam (SBV) in a recent forum, this was creating great pressure and risks for the credit institution system.
To solve this problem, in the next time, SBV would regulate active and flexible monetary policy; improve credit quality, consistent with the ability to absorb capital of the economy and continue to create favourable conditions for businesses to access to credits.
In addition, SBV would also coordinate with the Ministry of Finance and related ministries to accelerate restructuring, to develop quickly and sustainably the financial market segments, to create conditions for the private economy to raise capital in the stock market.
