So far this year, credit institutions have been flocking to the southern city of Can Tho to set up branches. Financial specialists forecast that there will be at least 26 credit institutions sharing each other’s market share in this relatively small Mekong Delta city by the end of this year.
Banks’ opening branches in Can Tho shows that this small city holds good potential in the region and will likely become a substantial financial hub in the near future.
Nevertheless, some said that in a bid to go ahead to meet the requirements of Decision 888 dated July 1, 2005, banks have to have a minimum chartered capital of 20 billion for each newly opened branch.
Figures of the State Bank of Vietnam’s Can Tho Branch show that by the end of June, state-run commercial banks still dominates market share in Can Tho, with 7.171 trillion dong out of total outstanding loan balance of 9.6 trillion dong by credit institutions.
Deposits of state-run banks have hit 2.29 trillion dong out of total 3.886 trillion dong all raised by commercial banks here.
However, a number of joint stock commercial banks’ have focused on Can Tho City to launch new services and promotional programmes to prise market share away from the predominant state-run banks.
Director of the State Bank of Vietnam’s Can Tho branch Ha Ngoc Hong admitted that the lending field is regarded as a cake to divide among joint stock bank players in Can Tho because it is estimated only about 10% of residents regard depositing their savings at banks as the first choice.
According to Ngoc, the point is that the January–June outstanding loan balance of joint stock banks only reached 6% of the total. In fact, in Can Tho as well as the Mekong Delta region, lending demand is not particularly high as yet due to there being few large corporate clients. Many of the customers who need to borrow capital for development investment often do not meet sufficient mortgage requirements under the SBV regulations.
“A branch of Vietnam International Bank (VIBank) has operated in Can Tho for six-months, but its outstanding loan balance reaped only 30 billion dong,” said Ngoc.
In such a context, many banks in Can Tho have been forced to jump into campaigns to lend to the agriculture field even though they are not very interested in this field due to the high risks and big capital management costs.
“There is now a trend that customers are switching from bank to another bank looking for the best deal,” said Tran Thi Thu, director of Vietcombank’s Can Tho branch.
It is easy to understand because banks have to compete and try to woo each other’s customers to pay for their regular operational costs while waiting for the arrival of new clients, said Ngoc. “Consequently, there are now insecure signs in operations of banks,” Ngoc said.
Reportedly, the non-performing loan ratio of credit institutions in Can Tho by the end of June had stood at 2.32%, or over 223 billion dong whereas earlier in 2005 this ratio was about 1.48%.
Ngoc said that “From July 1, banks will have to classify debts under Decision 493 of the State Bank of Vietnam, and it’s then we can see the bad debt ratio increase strongly due to instalment loans not paid up on schedule and become bad debts”.