Major banks to discuss credit crunch with property developers

Representatives of state-owned commercial banks Vietcombank and VietinBank have said they will work with real estate developers to resolve difficulties they are facing.

The duo are among the "Big 4" banks, together with wholly state-run Agribank and state-controlled BIDV.

At a meeting on real estate credit on Wednesday, after listening to major developers such as Vinhomes, Novaland and Sun Group sharing recent difficulties related to cash flow and capital mobilization, the representatives confirmed that the banking sector has spent a significant part of its credit balance on real estate for both corporate and individual customers.

They cited State Bank of Vietnam (SBV) data that shows that loans for real estate were valued at VND2.58 quadrillion ($109 billion) as of December 31, 2022, up 24.27% year-on-year and accounting for 21.2% of the entire economy’s total outstanding credit.

According to Vietcombank CEO Nguyen Thanh Tung, real estate credit currently accounts for more than 20% of the bank’s total outstanding loans. In 2022, its loans for property increased by 17%, focusing on feasible projects and people with real needs.

At Vietcombank, outstanding real estate loans for individuals make up 90%, while the remainder belongs to corporate customers.

"We have also been focusing on industrial real estate credit, with the 2022 balance four times higher than 2021," he said.

In 2023, Vietcombank will continue to give priority to industrial park and export processing zone development. The creditor will also design new and more open policies for resort real estate as this segment is recovering after the pandemic.

"Basically, Vietcombank will only give loans to reputable businesses," he noted.

Tung admitted that banks now face great pressure as they must ensure system safety, meet SBV rules and comply with international standards, while still ensuring sufficient capital supply for the economy.

"The government and regulators need to help the corporate bond market to develop safely and effectively to reduce the burden of providing capital for the economy on the shoulders of banks."

Regarding interest rates, Tung said that before the meeting, state-owned commercial banks agreed that in 2023 they will try to cut deposit interest rates, thereby reducing lending interest rates to support businesses and the economy.

Nguyen Hoang Dung, acting CEO of VietinBank, said that in fact, banks are sitting on a fire when real estate businesses face troubles because they are all on the same boat.

The bank has reserved more than 21% of its total outstanding loans for the sector while the remainder will go to over 1,000 other industries, he added.

Regarding a proposal made regarding debt restructuring and rescheduling by the Vietnam National Real Estate Association, Dung said that it should be considered carefully.

"If the real estate industry applies for debt rescheduling and restructuring, other industries will also follow suit. That would break the principle of market fairness. In addition, if banks reschedule debt payment deadlines for businesses, they will not meet the Basel II standards and hence their credit ratings will be downgraded by foreign institutions," Dung explained.