Strongly adjusting credit flow

Risks to the banking system still exist, so stricter control solutions are needed. Photo: ST

Real estate credit, investment in corporate bonds still increase

According to a recent report by the State Bank of Vietnam (SBV), as of March 31, 2022, outstanding credit for real estate business reached nearly VND784,000 billion, up 12% compared to the end of 2021 and tripled the overall credit growth rate of the whole system.

Credit for home purchase and home repair also continued to increase sharply, bringing the total outstanding loans to real estate to over VND2 quadrillion, accounting for about 20% of total loans.

Around the end of March 2022, a number of banks announced they would suspend the disbursement of loans to the real estate sector, in order to ensure compliance with the SBV's regulations on credit growth. However, these are banks that have closed their limits and are only temporary, so many bank leaders later confirmed that there was still room and would continue to increase lending to the real estate sector.

At the recent General Meeting of Shareholders (AGM) of VPBank, Mr. Nguyen Duc Vinh, General Director of VPBank, said that it is necessary to tighten credit in the real estate sector when this market is growing strongly.

However, people's need to buy houses is a legitimate need and is not restricted. While for VPBank, real estate plays an important role in the loan structure, currently accounting for less than 10% of the total loan balance, so it will continue to be maintained and promoted in the future but will focus on serving the needs of customers, and continue to control the credit of resort and speculative real estate.

Similarly, according to Mr. Nguyen Manh Quan, General Director of ABBank, some banks had to temporarily suspend real estate lending due to excessive lending.

But at ABBank, the proportion of real estate loans is still low, accounting for 6% of total outstanding loans, and housing loans accounted for 17% of total outstanding loans. For banks, the real estate lending index is closely monitored by the SBV, but ABBank is rated well by the SBV, not in the warning group, so it will continue to boost lending because there is still room.

In fact, real estate loans of many banks accounted for 30-70% of total loans. Considering the financial statements of the first quarter of 2022 of some banks, Techcombank has taken the lead in terms of outstanding loans for real estate business with outstanding loans of VND98,166 billion, accounting for 26.84% of the total balance in debt. Second is VPBank with total outstanding loans of VND42,484 billion, accounting for 11.35% of total outstanding loans; followed by SHB with VND24,826 billion, accounting for 6.68% of total outstanding loans.

In the annual publication of Vietnam's economic assessment in 2021, experts emphasized that the growth rate of real estate credit reached 17.14%, higher than the average growth rate of the whole system. This development shows that real estate and banks are still dependent on each other for growth.

Not only real estate, but banks have also added a significant amount of corporate bonds. In 2021, the total amount of corporate bonds held in the banking system is VND274,000 billion, accounting for 2.63% of total credit outstanding. Of which, Techcombank, VPBank and TPBank alone increased their corporate bond balance by VND38,000 billion, equivalent to 14% of the total outstanding corporate bond of the whole industry. The banks' financial statements for the first quarter of 2022 show that by the end of the first quarter, Techcombank is holding VND76,582 billion of corporate bonds, up 22.3% compared to the end of 2021; VPBank was VND41,593 billion, up 50%; MB was VND46,319 billion, up 26%.

Meanwhile, the financial statements for the first quarter of 2022 of banks show that the bad debt ratio tends to increase for the most part. According to experts of SSI Research, the bad debt ratio deteriorated in the first quarter partly due to the reclassification of restructured debts after the end of the restructuring period. This leads to great pressure on provisioning at banks.

Be strong to reduce risks

Regulatory agencies have continuously issued warnings as well as issued mechanisms to manage capital markets, reducing potential risks in the banking system. From the beginning of 2022, Circular 16/2021/TT-NHNN (Circular 16) stipulating the sale and purchase of corporate bonds by credit institutions has taken effect, which has contributed to preventing debt reversal.

An expert commented that this Circular has forced banks to increase provisioning, and increase the quality of corporate bonds, thereby reducing risks. In addition, the regulations also prevent debt reversal and credit room evasion.

For real estate credit, according to Mr. Nguyen Quoc Hung, General Secretary of the Vietnam Bankers Association, controlling real estate credit is necessary, but banks only stop lending to the speculative segment, still allowing real estate credit, borrowing to people who want to buy real houses and good projects. Banks also said they have appraised projects more closely, selecting good projects with high liquidity and adequate collateral.

For example, Techcombank is the bank with the highest proportion of real estate loans in the system and has just moved to "tighten" credit in this segment, but speaking at the recent AGM, according to Mr. Ho Hung Anh, Chairman of the Board of Directors of Techcombank, the real estate sector still has conditions to promote development and in the past five years, the bank has not had a problem with real estate lending. Currently, the bank focuses on retail and real estate consumer loans. With corporate bonds, Techcombank also appraises it as a medium and long-term loan.

Pham Quang Dung, Chairman of the Board of Directors of Vietcombank, also said that the bank has always actively participated in the corporate bond market with diverse roles such as professional investors, consulting organizations, guarantee organizations, and payment service providers, etc. Therefore, all outstanding corporate bonds of Vietcombank are currently classified as Group 1 debt (qualified debt). The issuers are all doing business efficiently and paying on time.

However, according to experts, more or less credit flow has not yet entered the manufacturing sector but is still poured into the asset market. Therefore, the management agencies must take more drastic measures but also be flexible.

Regarding the general solution to control risks in the banking industry, economist Dr. Vo Tri Thanh said that in the short term, there should be a "flexibility" to regulate medium and long-term lending.

The handling of frozen and rescheduling debts according to the SBV's circular must also be "smart" because it depends on the recovery and implementation of the economic recovery and development program. In addition, according to Dr. Vo Tri Thanh, banks need to continue to increase capital to ensure capital adequacy ratio, ensure governance activities according to international practices, and control credit in risky areas.

On the side of management agencies, leaders of the State Bank have also repeatedly affirmed that they will regularly inspect, examine and supervise the investment in corporate bonds of credit institutions, thereby directing, warning and requesting requires credit institutions to control risks in corporate bonds investment activities.

In addition, the State Bank will also continue to tighten lending to risky sectors, including real estate. Recently, regarding credit pouring into real estate, the Ministry of Construction also proposed to closely monitor and control to avoid double risks; prevent the use of capital sources for production and consumption loans for investment and real estate business in the form of speculation.