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Banks Eyeing Real Estate Instead of Stock Market   2008-01-23 - VietnamNet

Contrary to all predictions, commercial banks have not been overjoyed at the news that the central bank is considering loosening the control over securities loaning. The falling stock market does not promise fat profit for the banks’ loans to securities investors.

Though the State Bank of Vietnam has not made any official announcement that it will amend the Directive 03 on limiting commercial banks’ securities loans, it is very likely that it will do this.

The decision stipulates that commercial banks must reduce the securities loans to below 3% of total outstanding loans prior to December 31, 2007. The State Securities Commission (SSC) said that it has proposed the central bank to delay the deadline, so that commercial banks can pump more capital to the stock market to rescue the market from falling.

Analysts said that the information about the decision amendment should be good news for banks. However, it is quite a surprise that commercial banks keep calm when hearing the news.

The director of a big joint stock bank in Hanoi said that he will not hurry to resume lending to securities investors after it had to spend a lot of exertion to limit the securities loans. 

“We need some more time to listen to the news before making a decision,” he said, adding that he has a lot of other things to do in 2008, especially when the bank plans to open many more branches this year.

A representative from VPBank also said that the bank’s leaders have not made any decisions on whether to expand the credit to securities investors. The official said that VPBank is moving ahead with the plans on credit card development and a lot of big programs. Sources said that securities loaning is not the big interest of the bank any more, as the bank has shifted to focus on the real estate market, which can bring fat profit to the bank. VPBank is constructing a big building in District 1 of Ho Chi Minh City, which it will put into operation soon.

Analysts said that it is understandable why commercial banks remain indifferent to securities loaning which they were previously very interested. Banks only push up the securities loaning if they believe that the deals can bring them fat profit. Meanwhile, they don’t think that they can reap a lot of money with securities loans now, when the stock market is falling.

Therefore, even if the State Bank states that it will not limit the securities loans any more, it is not likely that commercial banks will rush to lend to securities investors.

The analysts said that many other banks have followed VPBank to fund real estate projects when they realized that the real estate market is so hot.

Eximbank and Techcombank are providing loans to help clients buy apartments at Sky Garden III in Phu My Hung urban area (the loans may be valued at 80-100% of the apartments’ value), while Techcombank is trying to push up consumer credit by launching a program on funding clients’ purchase of houses, consumers products and cars.


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