The central bank’s Deputy Governor, Phung Khac Ke, has said that bank loans for property projects were "not too much of a concern".
However, that does not mean banks should undo recent credit tightening in the currently inactive property market, he affirmed.
Ke told journalists that the State Bank of Viet Nam (SBV) has submitted a report to the Government on property-related lending by commercial banks, which shows that out of property loans, the ratio of non-performing loans is very small.
According to preliminary statistics quoted in VietnamNet, commercial banks have lent more than VND50 trillion (US$3.2 billion) to property projects equal to 10 per cent of all outstanding loans, 24 per cent of all medium and long-term loans. Seventy per cent of this amount is used in big cities.
Ke neither confirmed nor rejected the figure, however he said it may include irrelevant items.
"Some businesses borrow money to build offices for their own use, not to do business in the property market — whereas loans that need close supervision are those used to implement estate projects for sale," he said.
Ke also placed his faith in the autonomy and self-responsibility that banks apply in their business.
"Banks, when appraising a loan, must calculate the property’s real price based on property prices announced by local authorities instead of the ‘bubbling’ market price."
The real estate market is emerging from a prolonged lull, which lasted from 2001 to 2003, that sent land and house prices in urbanised areas in an upward spiral. The public was concerned that if banks overvalued property projects just as the market did, then they would find it hard to collect on loans when the bubble burst in the estate market.
At the moment, the estate market is attracting very few buyers, meaning investors can not sell their projects and repay loans.
However, Ke said that a serial collapse in the estate enterprise sector is unlikely.
"If the property developers default, then the commercial bank could still take away collateral, charge borrowers an overdue interest rate and downgrade the debts – in no way would it cause a serial collapse among enterprises."
Ke admitted there is pressure to increase the bad debt ratio, if the banks collect their loans in near future.
Official statistics from the SBV show that non-performing loans account for 7.4 per cent of all outstanding loans at the four State-owned commercial banks. Bad debt ratio is much lower at joint stock banks and foreign bank branches.
The SBV, at the Government’s order, earlier in March required commercial banks to examine the quality of bank credits to property projects. This has resulted in banks tightening their credits, presenting estate developers and traders with two problems: very few customers and little access to bank money.
Under these conditions, banks should be very careful in lending to the property market, Ke said.
Source: Vietnam News