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City banks seek sustainable growth   2008-02-05 - VNS

Banks in HCM City achieved record levels of capital mobilisation and lending last year, yet officials are still calling for more sustainable development.

Customers at a Southern Bank branch in HCM City. The city’s banks have diversified their services to attract more clients. — VNA/VNS Photo The Anh

HCM CITY — Banks in HCM City achieved record levels of capital mobilisation and lending last year, yet officials are still calling for more sustainable development.

According to the State Bank of Viet Nam, the city’s banks mobilised more than VND487 trillion in 2007, up 70.6 per cent over the previous year. Lending also wowed by reaching VND406.3 trillion, a 76.9 per cent surge.

Ho Huu Hanh, director of the State Bank’s HCM City branch said that last year’s credit growth helped push HCM City’s economic growth 12.6 per cent higher.

Hanh attributed the banks’ growth to the diversification of services, which attracts more clients. A series of new services including consumption lending were introduced last year to much interest.

The emergence of more small and medium-sized enterprises (SMEs) in the city in 2007 also contributed to the credit growth. Last year saw the establishment of 13,989 new SMEs in HCM City, hoisting the total to 49,213.

"Despite the banks’ growth, the economy failed to grow healthily," said Hanh. He explained that while banks complied with the State bank’s rule on securities lending by not reducing their outstanding loans against securities collateral, they increased their lending against other collateral such as real estate.

The State Bank of Viet Nam in May last year ordered that loans made for securities against collateral could not exceed 3 per cent of a commercial bank’s total loan portfolio. The move was made to ease fears that stock market volatility would derail the nation’s banking system.

According to State Bank statistics, the banks’ lending rates increased sharply at the end of the year. While October’s lending rose only 3.4 per cent over the previous month, the same figure in December was up 8.55 per cent.

The change appeared to have been in vain. "It did not help banks retrieve lending from securities investors. They instead exposed themselves to further risk as they turned to lending on real estate investment," Hanh said.

HCM City banks’ lending on real estate investment currently accounts for 10.8 per cent of the banks’ total outstanding loans, amounting to almost VND34.7 trillion.

Hanh urged banks to be more wary of lending on real estate investment. If not, the banks might face a totally different threat.

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