Small lenders find it difficult to reduce cross-ownership in other banks
The State Bank of Vietnam has sought the government’s permission to allow credit institutions more time to sell their stakes in other lenders since many smaller ones are struggling to do so.
Through a circular in 2015 it had set a February 2016 deadline for lenders to bring their ownership thresholds within the limits prescribed by the Law on Credit Institutions.
It wants to extend this to June 30, 2019.
The law allows individuals to own up to 5 per cent of the charter capital of a bank and institutions to own 15 per cent except in cases of distressed or equitised banks and ownership by a strategic foreign investor.
The extension of the deadline is aimed at helping small banks, who have reportedly had problems divesting and sought more time.
Big banks have had no such problems since they own shares mostly in large lenders who are doing quite well themselves.
Vietcombank for instance used to own stakes in Military Bank, Eximbank, OCB, SaigonBank and Cement Finance Company (CFC), and had to sell them to ensure its ownership was under 15 per cent.
In 2017 it sold VND66 billion (US$2.09 million), or 10.9 per cent, worth of shares in CFC, and VND132.5 billion ($5.84 million) or 4.3 per cent in SaigonBank.
In April this year it sold a 1.36 per cent stake in OCB for VND66.7 billion ($2.94 million).
Now it only owns 8.19 per cent of Eximbank and 6.97 per cent of Military Bank.
The bank plans to sell them early next year.
BIDV and Vietinbank have also successfully reduced their stakes in several credit institutions.
Smaller lenders’capital withdrawal was not as smooth as the big ones was.
At its recent annual general meeting Maritime Bank, for instance, did not spell out when it would sell the 9.98 per cent and nearly 5 per cent it owns in from PGBank and Pvcombank.
Analysts admitted the process at small banks is moving at a snail’s pace.
The question is why?
Experts said small banks have not been doing too well, and so selling stakes in them have been difficult or would have involved selling at low prices.
Another reason for the delay is that most small lenders, focused on settling bad debts, have been unable to multi-task.
The experts said, in the event, small banks should look at mergers and acquisitions, which would enable them to both reduce their cross-ownership and improve their balance sheets at the same time.
They pointed to Maritime Bank, which has merged with Mekong Development Bank and the Textile and Garment Finance Joint Stock Company, in each of which it owned a 10 per cent stake, as a successful example.
Property loans show no signs of slowing
The National Financial Supervisory Committee (NSFC) estimates that real estate-related credit makes up over 20 per cent of banks’ total outstanding loans.
It also revealed that last year consumer lending grew at three times the overall credit growth rate of 18 per cent to VND1.17 quadrillion (US$51.54 billion).
Some banks resorted to subterfuge by offering loans supposedly for “house repairs” and “house construction” to customers seeking consumer credit. Consequently, loans in these categories soared by 76.5 per cent.
A report by the Ministry of Planning and Investment’s business registration department said in the first half of this year the property sector had the highest number of newly established enterprises2,600and they have a total capital of VND150 trillion (US$6.6 billion).
In fact, they accounted for 41 per cent of all new businesses and 29 per cent of investment.
The aforesaid figures show that loans continued to be injected into the property sector despite the SBV’s efforts.
The central bank has announced several policies to limit lending to the real estate and construction sectors to better control bad debts.
Its Document 563/NHNN issued recently requires lenders to avoid too much focus on real estate customers and maintain credit growth in the sector within safe limits.
They must closely monitor lending to the real estate sector, regularly review the progress of property projects and their developers’ financial condition, particularly their collateral, and have measures in place to handle any defaults.
Besides properly evaluating and processing lending applications, the credit institutions must also monitor borrowers to ensure they do not use consumer loans for investment in property or securities.
Credit expansion should go hand in hand with strict supervision to ensure loans are used for their intended purpose and do not add to bad debts, the document said.
This is not the first time the central bank has instructed lenders to tighten credit to the real-estate and construction sectors. The move this time follows the acceleration of consumer lending last year and the diversion of a significant amount of consumer loans to the property sector this year.
In response to the central bank’s appeal, many lenders have become more cautious in appraising property-related loan applications.
They have tended to approve loans worth only around half the value of a property, give or take 20 percentage points, instead of almot the full amount as before.
Some banks even refuse to accept properties bought with borrowed money as collateral, and require borrowers to put up unencumbered properties.
Yet the money flowing into the sector has only fallen very modestly.
A SBV report said in the first quarter of this year property-related lending had risen by 3.65 per cent from the end of last year.
This figure is slightly lower than a year ago but is still very high.
Experts have called for tightening credit to the property sector in the coming years, pointing out this would result in better appraisal of property projects meaning fewer chances of loans going bad in future.
Circular No.19/2017/TT-NHNN issued by the SBV late last year called for reducing the use of short-term deposits for medium- and long-term loans to 45 per cent this year and 40 per cent next year.
The central bank has also kept the risk index at 200 per cent of receivables from the real estate in the coming years.
Ride-hailing companies rush to fill Uber-sized hole
Scores of local and foreign ride-hailing firms have entered the market since Uber’s withdrawal last April, targeting Hanoi and HCM City where Grab is the dominant player.
FastGo last week launched its ride-hailing service in Hanoi after three years of development.
The company plans to expand to eight cities in the next three years, targeting mainly youth and office goers and hopes to sign up 20,000 drivers, according to Sai Gon Times newspaper.
Besides FastGo, customers in Hanoi and HCM City can also download other ride-hailing apps such as Vato, T.Net, Go-ixe, and Xelo for bike and car transport services.
These local firms also plan to develop delivery and shipping services, transport sharing and passenger car-leasing services instead of directly competing with Grab.
Some foreign players are also keen to enter Vietnam, including Go-Jek of Indonesia, Didi Chuxing of China and MLV of Singapore.
Major local taxi companies like Mai Linh and Vinasun with fairly popular ride-hailing apps like V.Car and Taxi Mailing, face difficulties competing with Grab.
The departure of Uber has opened up a great opportunity for Vietnamese taxi firms and ride-hailing apps to jump into the e-hailing though analysts warn that the market will be not as lucrative as they think.
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