Banks expect credit growth from FDI firms

14-Jun-2014 Intellasia | Dau Tu Chung Khoan | 6:00 AM Print This Post

The growth of companies, especially the group of foreign direct investment (FDI) firms requires the capital demand increasingly. Banks’ credit is being improved more and more but there are still many risks.

Addressing at Vietnam-Singapore Business Forum taken place in the morning June 5, 2014, To Hai Anh, head of FDI customer department of Vietnam Commercial JS Bank for Foreign Trade (Vietcombank-VCB) said that FDI firms have gained high growth from 2009-2013. The growth of FDI firms has helped increase the capital demand and these customers have also been gradually expanding the relationship with Vietnamese banks. This is also one of advantages for banks to expand the market share in the service segment as well as credit growth.

At Vietcombank, total outstanding loans for FDI companies account for a rather high ratio of 17-20 percent of the bank’s total loans, of which, most FDI firms are operating in Binh Duong province, especially FDI firms from Singapore. Therefore, Vietcombank has constantly been expanding its network in the area to serve better corporate customers.

According to Anh, to expand the credit relationship with FDI companies as well as promote the competitive advantage, after cooperating with Japanese strategic partner, Vietcombank has signed credit contracts with 50 Japan’s local banks. These banks will provide Letter of Credit (L/C) to Japanese firms that are operating in Vietnam, so Vietcombank can provide credit, payment service and open L/C for Japanese firms based on the guarantee of those Japanese banks. The bank’s credit growth from FDI companies is very good and most credits are unsecured loans (no collateral) with preferential interest rates.

HCM City Development Commercial Joint Stock Bank (HDBank) has recently also provided unsecured loans to FDI firms at interest rate of 5 percent per year for US dollar and 12 percent per year for loans in dong. According to HDBank’s leader, the capital need of FDI companies is very high but they are still familiar with transactions with foreign banks in Vietnam. However, the extensive network of local banks is considered an advantage helping banks easier approach customers and offer better services. Thus, HDBank is step by step boosting the capital sources to support FDI companies and the interest rates are also being lowered gradually.

Amongst 32 FDI companies hit by the recent riots in Binh Duong and Dong Nai, 17 units have ever had loans with HCM City-based commercial banks, totalling about 132 billion dong and $4.7 million. Currently, only five FDI companies still have outstanding loans at banks but there are no bad debts.

Presently, many companies are still unable to access bank loans mainly due to the crisis of the real estate market. With Vietnam’s current economic situation, when the real estate market recovers only by 20-30 percent while banks need collaterals, in the short term, it is hard to expect a rapid credit growth. Notably, small and medium sized enterprises (SMEs) face difficulties in the collateral issue, for large firms, especially FDI companies, banks are still disbursing without too worries about the risks.

According to To Hai Anh, to meet the FDI companies’ need of more information, Vietcombank has established an investment division to advice customers and in the near future, the model will be replicated to the bank’s branches. Currently, Vietcombank has had a relative large number of FDI clients, of which firms from Japan and Singapore account for a high percentage.

 


Category: Finance

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