Speaking at a conference held in Ho Chi Minh City on January 17, Chairman of the city’s People’s Committee Nguyen Thanh Phong said the “the banking industry for many years has been considered the blood vessel of the economy and one of the most important industries of the city”.
During the 2011-15 period, the city’s banking industry reached an annual growth of 10.1%, ranking second among other sectors in growth.
“This year, the city aims to collect VND348 trillion (US$15.5 billion) for the State budget, an increase of 16.6% year-on-year, and an increase of 26% for city collections,” he added.
To complete its mission, Phong has told the State Bank of Vietnam (SBV) and commercial banks to improve supervision and inspection of credit activities for real estate projects and build-operate-transfer (BOT) transport projects; promote the restructuring of the banking industry; and settle bad debts.
“Increasing network security, ensuring safety for customers’ assets and further mobilising local residents’ savings are the most important tasks for SBV and commercial banks,” Phong said.
To Duy Lam, Director of SBV’s Ho Chi Minh City branch, said that in 2016, total assets of the banking industry in Ho Chi Minh City increased 14.4% to VND2.9 quadrillion (US$126 billion), with 10.7 million bank cards, a year-on-year increase of 8.1%; and 36,500 POS, or growth of 8.6%.
The local banking sector’s bad debt ratio was 3.6%, a reduction of nearly 8% compared with 2015.
“Last year, the monetary market and banking activities in Ho Chi Minh City remained stable, despite many unexpected events in the world’s economy, affecting the Vietnamese economy,” Lam said.
By the end of 2016, the deposit interest rate was 4.8%-5.2% for dong under six month terms, 6.6%-7% for over 12 months, and zero for US dollar loans.
The short-term lending interest rate for five priority industries was around 7% and did not exceed 8.5% for other industries. It was 8.7%-9.7% for medium- and long-term loans.
The foreign currency exchange rate increased 1.23% compared with last year and total remittances were around US$5 billion.
“The liquidity of the banking system remained stable and the safe operation index was ensured. Capital usage ratio was 82.9%,” Lam added.
He also said that banking activities in Ho Chi Minh City achieved growth and development, in which outstanding loans increased 19.3%, the highest growth in recent years.
“Banking services developed well and business results of financial institutions improved,” he added.
Retail banking services and electronic banking like mobile and internet banking achieved high growth of more than 50 percent compared with 2015.
“Activities that helped solve difficulties for the business community were executed well, with total outstanding loans of VND770 trillion (US$35 billion), an increase of 10% over 2015, in which VND145 trillion was borrowed at preferential interest rates,” Lam added.
The Banking – Enterprises Connectivity programme allowed nearly 22,000 customers to borrow VND281 trillion.
Lam also warned that financial institutions in Ho Chi Minh City must be aware of potential risks, especially bad debt and slow restructuring, which could affect the sustainable and stable development of the banking system.
“Technological risks also need more attention,” he said.
This year, the banking industry in Ho Chi Minh City
has set a goal of reaching 18% credit growth, 16% growth of capital mobilization, and bad debt under 3%.
“The banking sector will continue to implement the credit programmes of the Government, SBV and the city,” Lam added.
SBV Governor Le Minh Hung said that SBV “would pay attention to bank restructuring and settling of bad debts in 2017”.
Last year, SBV restructured five “special” banks and ensured safe operation of the entire system.
“We have reviewed the last five-year period of restructuring and settling bad debts and will release the next five-year plan soon,” he said.
In addition, SBV will work with agencies to map out a special law on supporting the banking sector in restructuring and resolving bad debts, which will include legal regulations.
Obstacles in existing legal regulations will also be addressed under the new law to remove hindrances in resolving bad debts.
The SBV has set a goal to gain credit increase of 16% for a growth of 16%-18% in total payments, and will try to cut medium- and long-term interest rates, as well as stabilise the foreign currency exchange rate.