By Nhung Nguyen – Translated by Tan Nghia
Strong increase in capital demand has been seen as production activities of enterprises gradually showed signs of recovery, forcing banks to reschedule their lending plans.
According to the State Bank of Viet Nam (SBV), deposit and lending interest rates continued to decline compared to the end of last year. The central bank required commercial banks to strictly control credit flow in risky areas such as real estate and securities to accumulate capital for production and business of priority sectors.
As of April 16, the economy’s credit increased by 3.34 per cent compared to the end of last year. In the first quarter of 2020, the credit of the economy only increased by 1.47 per cent.
Nguyen Hoang Minh, Deputy Director of the State Bank in charge of HCM City Branch, said capital mobilisation increased only 0.7 per cent while outstanding credit increased by 3.5 per cent compared to the end of last year.
Leaders at some commercial banks told media demand for capital from businesses and the market is increasing as the economy recovers from the COVID-19.
The deputy general director of one plastic company, which could borrow with the lowest interest rate in the industry at about 5.4 per cent per year, said: “Production and business activities recovered quite strongly compared to last year, and the company’s capital demand is large. Our enterprises are also classified as high credit, so they are given priority by the bank.”
Talking at the recent 2021 annual shareholder meeting, Nguyen Duc Thach Diem, General Director of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), said that by mid-April this year, the bank’s capital mobilisation increased by just 3.5 per cent while lending increased to 5.8 per cent.
Previously, the general director of Sacombank also said that many individual and corporate customers contacted the bank for loans. As credit growth target was only about 9 per cent this year, it could not meet all of the demand but instead focus on production businesses and limit the flow to real estate.
Nghiem Xuan Thanh, chairman of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), said the bank’s credit balance increased by 3.7 per cent while the whole system increased by 2.93 per cent, adding the bank was number one in credit growth last year and continued to have the largest growth in term of credit so far this year.
Seeing the increase, the central bank again told commercial bank to manage their lending, in which they must offer low interest rates for production firms, helping them recover, while most of the commercial banks wanted to increase their credit limit to serve demand.
At the same time, leaders of many banks said that they would strictly control capital in risky areas such as real estate projects, BOT, and securities.
Leader of one large-scale joint stock bank said: “Banks are tightly controlling capital flows into real estate, especially in areas with land fever. For individual customers, if they ask for a loan to buy a house to live in, they will be given preferential treatment but if they borrow to buy a house as an investment to rent, the bank will apply higher interest and lending rates because of higher risk factors.”
Nguyen Tuan Anh, director of the credit department of SBV told the banking industry meeting on Q1 results that the central bank set this year’s credit target of about 12 per cent and it would be adjusted in accordance with the actual developments and situation.
Again, Anh said SBV required credit institutions to continue to expand their capital and focus on lending to priority areas and tightly control credit in potentially risky areas such as real estate, BOT projects, and securities.
At the same time, the central bank asked credit institutions to continue implementing solutions to overcome difficulties for people and businesses affected by the pandemic.
According to statistics to the beginning of April, 2021, credit institutions have restructured the repayment term for 262,000 customers with a loan balance of about VND357 trillion (US$15.38 billion) as well as exempting and reducing interest rates for more than 663,000 customers with outstanding loans of VND1.27 million billion, giving new loans worth more than VND3.16 million billion with preferential interest rates with accumulated sales from January 23, 2020. — VNS
The Ministry of Finance has announced a draft circular encouraging the public to make their social and charitable donations by bank account transfer or electronic payment methods.
After over one year of fielding suggestions on management of such contributions, the Finance Ministry on Wednesday released its draft circular providing guidance for collection, management and expenditure of social and charitable donations as well as grants to relic sites and festive activities.
Regarding charitable donations or funding for relic site protection, donors should directly put their cash contributions into boxes for kindness, transfer their grants to the bank accounts of relic management agencies at commercial banks or state treasuries, or hand over their valuable papers to those agencies.
In case valuable papers are certificates carrying their owners’ names, donors are required to get through the transfer procedures as prescribed by current regulations.
For donations in forms of precious metals or stones, relic management agencies are allowed to put them up for auctions or sell them to commercial banks, with proceeds from the sale recognized as cash contributions.
In the draft circular, the Finance Ministry also set forth many principles on fund-raising and receipts of charitable donations.
Accordingly, the ministry strictly prohibits taking unfair advantage of any festivals or using relic sites for individual or group interests.
All receipts and expenditures of charitable donations must be recorded fully, correctly, publicly and transparently.
Certificates of donation must be issued at the donors’ requests.
In case a relic management agency receives a donation of VND100 million (US$4,300) or more, the agency must put it into its account at a commercial bank or a state treasury branch.
With respect to management of charity boxes, relic management agencies must regularly check and count the money inside such box on the daily, weekly or monthly basis.
Such activities must be made in writing with signatures of the keeper of the charity box key, the accountant in charge, and the representative of the security guard team at the relic site.
Donations to relic sites are intended to be spent on purchase of incense sticks, flowers, offerings, stationery and supplies; restoration or construction works; payment of wages and expenses on use of public services; and other expenses related to the relic site’s daily activities.
Expenditures from a donation must be within the relics’ internal spending regulations and the expectations of its donor.
In case the donation recipient is a religious entity as a public non-business unit, expenditures from a donation are required to meet both the donor’s expectations and the spending rules of state agencies.
Festival organizers and relic management agencies must open their bank accounts at commercial banks or state treasury branches to receive cash donations so that the receipt of and payment from such donations can be monitored.
In case the donation receiver is a state agency or a public non-business unit, it must open its account at a commercial bank to receive and manage all cash donations.
When the receiver needs to use the money, it must transfer such amount to its account at the State Treasury for the purposes of expenditure management and settlement.
The Vietnamese government welcomes Sumitomo Mitsui Banking Corporation’s deal worth US$1.4 billion to acquire 49% stake at local consumer finance firm FE Credit.
The Vietnamese government encourages foreign investment into local credit institutions in a bid to enhance efficiency and safety of the banking sector.
|Deputy Prime Minister Pham Binh Minh (r) and SMFG’s General Manager of Business Development Masahiro Yoshimura (l). Photo: Hai Minh|
Deputy Prime Minister Pham Binh Minh gave the remarks in a meeting with General Manager of Business Development at Japan-based Sumitomo Mitsui Financial Group (SMFG) Masahiro Yoshimura on April 28.
Minh welcomed the deal, which is worth an estimated US$1.4 billion from Sumitomo Mitsui Banking Corporation (SMBC), to acquire 49% stake at consumer finance firm FE Credit from Vietnamese VPBank, urging the two sides to soon complete the procedures in accordance with the law. SMBC is one of Japan’s largest commercial bank and a member of SMFG.
The Deputy PM expected SMFG and SMBC to continue expanding their operation in Vietnam, in turn serving as a bridge to promote Japanese investment capital to the country.
“Japanese financial institutions, including SMFG, have made a positive contribution to strengthening bilateral economic cooperation,” Minh added.
On his part, Yoshimura stressed SMFG’s commitment to expanding its business activities in Vietnam, expressing his confidence Vietnam – Japan relations would continue to improve in the future.
For the past 20 years, SMBC has been operating in Vietnam under the form of a foreign branch and a strategic shareholder at Eximbank.
“The bank so far has been providing financial services, while supporting major energy and infrastructure projects worth a total of US$20 billion in Vietnam,” he noted.
Referring to the stake acquisition at FE Credit, Yoshimura noted the deal is currently the largest investment project in Vietnam’s banking sector, indicating SMFG’s strong commitment for Vietnam’s development.
Japan is Vietnam’s largest ODA donor with around US$27 billion, and also the second largest investor by pouring US$60.3 billion into the country, or 15.7% of total registered FDI in Vietnam.
In 2020, Japan remained Vietnam’s fourth largest trading partner with bilateral trade turnover of US$60 billion.
In the banking sector, Japanese firms have the third largest foreign presence in the country with six branches, two wholly foreign-owned financial companies and 10 representative offices.
Major Japanese banks have also been strategic shareholders at several banks in Vietnam, including Mizuho Bank with 15% stake at Vietinbank, and SMBC with 15% at Eximbank.
|The Indochina Kajima joint venture will be assisted by VietinBank’s know-how in financial services and more|
With an investment commitment of $1 billion in Vietnam, Indochina Kajima aims to develop a portfolio of resorts, urban hotels, residential areas, offices, and industrial projects. It is committed to creating innovative real estate, enriching the communities in which it operates.
The company’s first statement in Vietnam is Wink Hotels – a chic, fun, vibrant hotel brand born in Vietnam for Vietnam with a pipeline of over 20 hotels across the nation. Indochina Kajima last month celebrated the opening of Wink Hotel Saigon Centre in District 1, which was followed by a groundbreaking ceremony for a luxury resort project in Bai Nom, in the central province of Phu Yen.
The company is also looking to develop industrial and logistics real estate in major markets such as Ho Chi Minh City, Haiphong, Bac Ninh, Danang, Vinh Phuc, Dong Nai, and Binh Duong.
“This partnership aims to strengthen cooperation at a higher level between Indochina Kajima and VietinBank in activities including financial services, banking services, branding, and communications,” said VietinBank CEO Tran Minh Binh “Both companies will leverage advantages and strengths to support one another in our business expansion and development, in compliance with the laws.”
Indochina Capital CEO Peter Ryder added, “Indochina Kajima has a clear strategy that addresses the current and future demands of the market while maintaining unwavering commitment to architectural excellence, environmental sustainability, and social responsibility. We believe all our developments are more than just a building or a brand, but all part of a lifestyle movement, changing the way people travel, work and live. We are proud to have VietinBank join us as a strategic partner in this transformational journey.”
VietinBank is a leading commercial bank in Vietnam in terms of total assets and accounting for nearly 12 per cent of lending market share, with stable capital and a solid customer base. VietinBank has maintained its position as a key commercial bank, a major contributor to the development of Vietnam’s banking industry, and to the socioeconomic development of the nation.
VietinBank has been a partner to Indochina Kajima in various projects and the bank will be providing banking and financial services to Indochina Kajima’s future projects in Haiphong, Hanoi, and Phu Yen, among others
Indochina Capital, founded in 1999, is one of Vietnam’s leading real estate advisory, investment, and development companies with a portfolio of iconic landmarks including the Four Seasons the Nam Hai, Six Senses Con Dao, Hyatt Regency Danang, Indochina Plaza Hanoi, and Indochina Riverside Towers Danang.
Founded back in 1840, Kajima Corporation is one of Japan’s top contractors and real estate developers with a global footprint including some of the world’s most iconic properties, such as the Four Seasons Hualalai in Hawaii, Saint Endréol Resort in France, and Senayan Square in Jakarta.
Indochina Capital first entered into a joint venture with Kajima Corporation in 2016. to launch real estate development platform Indochina Kajima. The venture is fully committed to creating innovative real estate developments that build value for partners, clients, and investors, while providing fulfilling opportunities for employees and enriching the communities in which it operates.
By Hoang Anh
|Banks roll out green credits for eco-friendly approach|
The Vietnamese government’s increasing support and gradual policy reform in recent years have boosted green projects in different sectors across the country.
According to Stephanie Betant, country head of Wholesale Banking at HSBC Vietnam, there is a momentum building up worldwide of environmental and climate risks being regarded and managed alongside any other financial risks – and as a result, the demand for green credit rises.
The State Bank of Vietnam (SBV) said that the country currently has 31 financial institutions involved in green credit, with total credit of more than VND285 trillion ($12.4 billion), mainly on green agriculture and renewable energy.
Eco-friendly credit and green bond issuance have received great attention as these debt instruments could promote a lower-carbon and a more resilient economy. According to SSI Research, the bond value mobilised for solar power projects climbed to VND29.9 trillion ($1.3 billion) in 2020, a 254 per cent jump on-year.
In terms of credit sources, by the end of 2020, banks had poured VND84 trillion ($3.65 billion) into renewable energies, mostly lending to solar power projects. That is because solar power is deemed a renewable energy that is stimulated for investment and development, Betant explained. Credit channelling into solar projects just accounts for 1 per cent of banks’ total outstanding loan balance.
Last November, HSBC Vietnam inked an agreement with Vietnam-based REE Corporation to provide a 7-year term loan worth nearly $28.7 million to develop a rooftop solar project. Previously, the bank signed a green credit agreement to finance Duy Tan Plastics Recycling Factory.
“Green investment, like new technologies, usually require a long payback period, a large sum of capital, and strong expertise to ensure that those projects meet all green criteria from starting point to product commercialisation,” said Betant. “While some of these projects have a longer tenure, particularly in renewable energy, the green lending framework is an expertise that is developed in addition to our existing commercial lending know-how. Internationally, and when the policies allow for it, green projects have financing that range between 8-15 years. HSBC Vietnam has recently granted a credit facility up to seven years to finance a rooftop solar project, and the tenure is longer than our current term loan offered to the client.”
Early in January, UOB Vietnam rolled out the first two green credit packages in its Smart City Sustainable Finance Framework for two Vietnamese companies, namely Steel Structure JSC (ATAD) and Phan Vu Investment JSC, as part of the bank’s dedicated financing framework to make sustainable finance more accessible.
Harry Loh, CEO of UOB Vietnam said, “The transition from non-renewable energy to renewable energy requires collaborative efforts from all relevant parties. UOB is one of the pioneers in providing green credit in Vietnam as the bank supports the transition to sustainable energy. After green credits granted to ATAD and Phan Vu, we will continue to promote the provision of green and sustainable finance to enable more businesses to thrive, while protecting the environment at the same time.”
Last year, Standard Chartered Bank also sharpened its focus on eco-friendly initiatives by joining other lenders including the Asian Development Bank, Bangkok Bank, Kasikorn Bank, Kiatnakin Bank, and Industrial and Commercial Bank of China to roll out a climate-friendly syndicated loan of $148.8 million for Phu Yen Solar Power Plant.
The project – which is expected to reduce 123,000 tonnes of CO2 per year – is considered the single largest operating solar power plant in the country and one of the largest in Southeast Asia.
The bank has continued to make great strides in financing a green agenda by aligning its goals with international practices on sustainability and joining the globe’s climate commitments.
“Our wide range of network covers the world’s largest and fastest-growing economic zones. We are committed to actively engage with our clients to influence their transition strategies as well as to foster sustainable growth across borders by a number of forthcoming sustainable financing approaches,” said Michele Wee, CEO at Standard Chartered Vietnam.
On the same note, Citibank is also targeting net-zero greenhouse gas emissions by 2030 and to make good on the promise of the Paris Agreement. The global lender is interconnected with many carbon-intensive sectors that continue to help drive global economic development. Citibank Vietnam has recently been committed to net zero by facilitating some low-carbon projects and not financing carbon-intensive projects.
“Vietnam ranks sixth among the most vulnerable countries to climate change, and at the same time, it is a fast-growing emerging economy with a real GDP growth rate of 7 per cent in 2019,” the State Securities Commission (SSC) noted. “To achieve rapid economic development, build resilience, and meet adaptation and mitigation targets, it is fundamental that not only the government but also the corporate community is aligned and well-informed about the debt instruments available and the opportunities that these issuances avail.”
In Vietnam, around 70 per cent of capital needed in the economy is being financed by the banking system. Therefore, this system will need to play an important role in the growth of the country’s green financial market.
So far, the SBV has actively participated in campaigns for a green economy. In 2015, it issued Directive No.03/CT-NHNN on promoting green credit growth and environmental and social risk management in credit granting activities. In response to this directive, several green credit campaigns have been started.
According to the SBV, by the end of June 2019, there were more than 20 credit institutions providing green loans with a lending balance of $3.8 billion, an increase of 32 per cent compared to 2018. Agriculture, renewable, and eco-friendly power projects are among the focus of the loans, accounting for 45 and 17 per cent of the total outstanding green credit, respectively.
As of October 2020, Vietnam has seen four green debt issuances totalling nearly $284 million, issued by one government-backed entity ($23.4 million in 2016), one municipal government ($3.6 million in 2016) and two green loans ($71 million and $186 million, respectively, both in 2020).
Most of the proceeds (78 per cent) have been used towards renewable energy, which remains the main sector of interest of Vietnamese stakeholders along with waste and agriculture. The confounding factors of climate change, rapid urbanisation, and strong population growth mean that Vietnam needs to prioritise more resilient and sustainable water management, as well as low-carbon transport development, cited from SSC statistics.
According to the International Finance Corporation, Vietnam’s climate-smart business investment potential amounts to an estimated $753 billion between 2016-2030, with the majority ($571 billion) going towards the country’s infrastructure needs by 2030. Potential investment in renewable energy totals $59 billion, with over half of this in solar power and another $19 billion for small hydropower projects. Meanwhile, new green buildings represent an almost $80-billion investment opportunity.
Pham Nhu Anh, head of the Corporate and Investment Banking Division at Military Bank, explained to VIR some major risks associated with the climate-friendly initiative including risks in project appraisal; balancing and meeting the capital needs for projects requirements; collateral; revenue or project efficiency; and challenges stemming from the domestic legal framework.
“Green credit has been a popular field among developed countries yet remains quite new to Vietnam. Considering the green sector as one of the inevitable trends that bring significant benefits to the society, we hope to receive guidance from regulators, the SBV, and the cooperation of credit institutions, as well as the support of customers so as to better fulfil our role in providing green credit,” Anh said.
Betant of HSBC also emphasised, “Fundamentally, green loans can be of any type of loan instrument and they have the same credit risks in comparison. A bank should consider a corporate risk profile as a whole and specific related green project when assessing green credit. In addition, the green element must be clearly designated, following The Green Loan Principles.”
Betant added that it does not mean that HSBC is trying to provide as many green credits as possible. Instead, it tries to raise the bar in selecting projects to finance and strive to look for green ones. “Applying for a green loan with HSBC, besides satisfying the requirements to become HSBC’s corporate clients, a green project needs to go through our strict credit approval and management process of sustainable financing controlled by the HSBC Asia-Pacific Sustainable Loans Committee – the dedicated body of the bank, with rich experience in successfully arranging green financing in different fields right around the world,” she added.
By Luu Huong