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
VPBank on Wednesday signed an agreement to sell a 49 per cent stake in FE Credit to Japan’s Sumitomo Mitsui Finance Group (SMFG) in a transaction that values the non-bank lender at US$2.8 billion.
SMBC Consumer Finance Company (SMBCCF), a subsidiary of SMFG, bought the stake.
Through this transaction, FE Credit is expected to receive support in capital resources, management capacity and experience in the consumer finance sector in Asia from SMBC Group, especially SMBCCF – a leading consumer finance company in the Japanese market. At the same time, this transaction will add a large amount of capital to VPBank, contributing to enhancing the bank’s financial potential to capture new investment opportunities in the market.
For SMBC Group, the investment in FE Credit is part of the group’s mid-term strategy to expand its business base in Asia. SMBC Group expected that this investment would create synergy in both sharing and acquiring business know-how of its partners.
FE Credit is currently the leading consumer finance company in Viet Nam with approximately 50 per cent market share, 20,000 service referrals nationwide, and over 13,000 employees. During the development process, FE Credit has consistently carried out the mission of “meeting the need to access official credit capital of all classes of the population in order to improve the quality of life”. With small loans, FE Credit is especially focused on serving middle and low income earners – a segment which has not yet been served by banks – to help reverse their dependence on “black credit”. FE Credit has served nearly 11 million Vietnamese people through its unsecured loan products and services so far.
SMBC is one of the three largest financial and banking groups in Japan, with total assets of over $2.1 trillion as of December 31, 2020. The group operates globally in retail banking, corporate banking, and investment banking, with a presence in more than 40 countries. SMBCCF is the leading consumer finance company in the Japanese market with more than 900 branches nationwide. In the Asia region, SMBCCF has established subsidiaries in Taiwan, Hong Kong, Thailand, and China. — VNS
Monetary policy should be maneuvered in a flexible and active manner to ensure sustainable growth and stability of both monetary and foreign-exchange markets, said the Party chief Nguyen Phu Trong.
As a “veins” for the economy, the banking sector should continue to push for a comprehensive reform to better support the country’s process of modernization and industrialization.
|General Secretary of the Communist Party of Vietnam Nguyen Phu Trong at the ceremony. Source: VGP|
General Secretary of the Communist Party of Vietnam Nguyen Phu Trong gave the remarks at a ceremony marking 70th anniversary of Vietnam’s banking sector today [May 5].
“Priorities for the sector is to control inflation, stabilize macro-economic conditions and meet credit demand as the country continues pushing for greater socio-economic development,” said Trong, adding these tasks are of significance during the period of economic recession as a result of the Covid-19 pandemic.
The Party chief referred to the resolution of the 13th National Party Congress on the orientation for economic growth, saying the State Bank of Vietnam (SBV) should run monetary policy in a flexible and active manner along with other policies to ensure sustainable growth and stability of both monetary and foreign-exchange markets.
While the banking sector remains a major source of capital supply for the economy, Trong noted SBV’s policies would have major impacts on economic security and public order.
As the local economy is still struggling with Covid-19 impacts, Trong lauded the banks’ efforts in keeping a low-interest rate environment and timely provide capital to help enterprises recover from the current crisis.
Referring to ongoing efforts to restructure credit institutions and settle bad debts in the system, Trong called for banks to catch up with new development trends to reach regional and international levels.
“Perfecting legal framework and efficiency in operation are key to safeguard financial market stability and prevent risks in banks’ operation,” Trong continued.
|SBV’s Governor Nguyen Thi Hong|
At the event, SBV’s Governor Nguyen Thi Hong said the central bank is committed to further enhancing efficiency of monetary policy management for greater economic resilience against external shocks.
“Along with efforts to deepen international economic integration, macro-economic stability is key to enhance the country’s economic independence,” Hong stated.
Hong said the main objectives of SBV’s plan in restructuring the banking sector is to adopt international practices into banks’ operation for higher transparency and efficiency.
“In a rapidly changing world, a revised legal system for banks would promote the development of new services to better serve enterprises and people, in turn contributing to the process of national digital transformation and digital economic development,” Hong concluded.
|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
|SMFG acquires a 49 per cent stake in FE Credit|
Vietnam Prosperity Joint Stock Bank (VPBank) yesterday announced that it had reached an agreement with Sumitomo Mitsui Financial Group (SMFG, the corporate group will collectively be referred to as SMBC Group) to sell 49 per cent of charter capital of $2.8 billion VPBank Finance Co., Ltd. (FE Credit). SMBC Consumer Finance Company (SMBCCF), a subsidiary wholly owned by SMFG, is the legal entity to purchase this stake.
Nikkei Asia reported the Japanese bank will invest more than $1.4 billion in FE Credit as early as October, making it an equity-method affiliate.
FE Credit is currently the leading consumer finance company in Vietnam with approximately 50 per cent of the market share, 20,000 points of sales nationwide, and more than 13,000 employees. Throughout its development, FE Credit is committed to accomplishing its mission of “satisfying the need of people of all strata to access formal credit to improve their livelihood”.
With its small-sized loans, FE Credit always pays special attention to serving low and medium-income customers – being the segment not prioritised by banks – in order to meet their financial needs and help reduce their dependence on “black credit”. So far, FE Credit has served about 11 million Vietnamese people with its unsecured lending and services.
Meanwhile, SMBC Group is one of the three biggest banking and financial groups in Japan, with total assets of over $2.1 trillion as of December 31, 2020. The group operates in retail banking, corporate banking, and investment banking worldwide, with its presence in over 40 countries. SMBCCF is the leading consumer finance company in Japan with more than 900 branches. In Asia, SMBCCF has established subsidiaries in Taiwan, Hong Kong, Thailand, and China.
With this transaction, FE Credit expects to receive support in terms of funding, corporate governance, and know-how in consumer finance in Asia from SMBC Group, especially from SMBCCF – the leading consumer finance company in Japan. Besides, VPBank will have at its disposal a significant amount of capital, thus enhancing the bank’s financial capability in pursuing new investment opportunities in the market.
As for SMBC Group, the investment in FE Credit is part of the group’s medium-term strategy in expanding its franchise in Asia. SMBC Group expects the investment will generate synergies in two ways: sharing its business know-how with and absorbing business know-how from its partners.
By Nhat Minh