Sacombank violates rules in granting loans to 16 clients: inspectors

Vietnamese private lender Sacombank commited violations in granting loans worth VND15.22 trillion ($642.38 million) to 16 customers as of August 31, 2018, government inspectors say.

The Government Inspectorate has concluded that Sacombank violated regulations in the appraisal of loan conditions. It granted loans for projects of dubious feasibility that lagged behind schedule, increasing interest expenses and affecting the effectiveness of business investment plans. The customers’ loan use plans were not feasible and carried potential risks.

The 16 customers, split into three groups, were legal entities belonging to major groups and corporations. The first group comprised two members of the Dong Tam Group – Dong Tam JSC and Soai Rap Production Trading Company Limited – that had total outstanding loans worth VND1.04 trillion ($43.99 million) as of August 31, 2018.

The second group comprised 10 debtors related to the Him Lam group: Him Lam Thu Do JSC; Hong Bang Investment JSC; Bao Loc Investment and Construction JSC; Nam Thang Investment, Trading and Service JSC; Cong Phuc Construction JSC; Bao Tin Infrastructure JSC; Viet Phu My Investment and Construction JSC; Viet Ha JSC; Hiep An JSC; and Long Bien Investment Corp.

Nine of these businesses (excluding Long Bien Investment Corp.) reported outstanding loans VND9.26 trillion ($391.8 million) or 48.52% of Sacombank's equity as of August 31, 2018.

These enterprises invested the borrowed capital in the same project - Saigon Binh An Urban Area.

They did not directly implement the project, but borrowed money to transfer to a third party through signing in-principle contracts on the transfer of the project’s subdivisions.

Sacombank appraised the financial capacity of the borrowers but not of the project developers. This created potential risks for the bank. Meanwhile, the project faced land-related legal issues and increased interest expenses, affecting the lender’s credit quality and business results, the inspectors said.

The third group of debtors with total outstanding loans of VND4.31 trillion ($182.35 million) were: Office 85 Real Estate Co., Ltd (VND1 trillion); Saigon Signature Real Estate Investment and Development Corp (VND2.27 trillion); Vina Alliance Co., Ltd (VND491 billion); and Tri Duc Real Estate Co., Ltd (VND 546 billion). These firms were closely related to HCMC-based property developer Van Thinh Phat Group.

Truong My Lan, chairwoman of Van Thinh Phat, was arrested last October for alleged fraud in the issuance and trading of corporate bonds. The 66-year-old has been accused of illegally issuing bonds to raise trillions of Vietnamese dong (tens of millions of dollars) from investors during the 2018-2019 period. So far, 32 people have been prosecuted for involvement in the Van Thinh Phat scam.

Notably, among the 16 customers, Saigon Signature alone had outstanding loans of VND2.34 trillion ($98.77 million) as of October 10, 2021.

Established in 1991, Sacombank is one of the first joint stock commercial banks in Ho Chi Minh City. It targets pre-tax profit of VND9.5 trillion ($405 million) in 2023, up 50% year-on-year.

Listed on the Ho Chi Minh Stock Exchange (HoSE) as STB, it plans to have a total asset value of VND657.8 trillion ($28.04 billion) and mobilized capital of VND574.6 trillion ($24.49 billion) in 2023, both up 11% year-on-year.

STB closed Monday’s trading session at VND28,000 ($1.18) per share.