Sunday, 23 Sep 2018

Vietnam banks long for foreign capital

Updated at Wednesday, 12 Sep 2018, 07:00
The Hanoitimes - Securing long-term finance is considered a common challenge for Vietnamese banks, CafeF reported.
A growing number of Vietnamese banks are seeking long-term lending from foreign financial institutions in recent years. 
Illustrative photo.
Illustrative photo.
Recently, International Finance Corporation (IFC), a member of the World Bank, is expected to provide Orient Commercial Bank with long-term funding of US$100 million, aiming to expand the latter's lending portfolio to retail and small and medium enterprises (SMEs), Deal Street Asia reported. 

Saigon - Hanoi Commercial Bank (SHB) signed two loan agreements with International Investment Bank (IIB) and International Bank for Economic Cooperation (IBEC), both from Russia, last week worth US$20 million and EUR20 million (US$23.16 million), respectively. 

According to SHB, funds from IIB will support the bank in infrastructure development projects in Vietnam, as well as projects involving SMEs and green energies. Meanwhile, IBEC's provision of US$23.16 million loans to SHB is expected to support international transaction, including transactions of import - export activities between IBEC's country members.

In August, LienVietPostBank signed a US$50 million credit agreement with JPMorgan Chase Bank to supplement medium and long-term foreign currency to the bank. 

In recent years, Vietnamese banks have been seeking financial supports from foreign organizations. In the beginning of the year, IFC provided a syndicated loan of US$100 million to TienPhong Commerical Bank (TPBank). The IFC-led financing package will help TPBank to further extend long-term funding to micro, small and medium enterprises, and individual borrowers through digital delivery channels.   

Similar moves were conducted by banks in 2017, including a US$100-million loan from Deutsche Bank and US$41 million from Credit Suisse for Vietnam Prosperity Commercial Bank (VPBank). 

Another syndicated loan of US$150 million from IFC was also provided to An Binh Commercial Bank (ABBank) to boost lending to SMEs by the end of 2017. 

Securing long-term finance is considered a common challenge for Vietnamese banks, especially when the proportion of short-term capital to be used for medium- and long-term lending by banks in 2018 will be 45% instead of the previous 50%, and this ratio will be further reduced to 40% in 2019. 

Moreover, mobilized interest rates of banks have been increasing over the last two months, indicating high demands of lenders for capital. 

Under this circumstance, seeking loans from financial institutions is considered a feasible solution and balance source of capital for medium- and long-term lending. This option would help banks increase profitability as commercial banks can still provide short-term loans in foreign currencies to export firms by the end of 2018 under the SBV's instruction. Meanwhile, it is increasingly challenging for banks to mobilize foreign currencies with 0% of interest rate as regulated by the State Bank of Vietnam. 
Ngoc Thuy
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