Bankers find SME customers most attractive

In a complete about-face from earlier this year, lenders are now falling over themselves to grant business loans, especial to smaller firms – as long as they can meet eligibility requirements.

Small- and medium-sized enterprises (SMEs) are now the target customers of local banks, which should be focusing on providing more services to meet their needs, bankers have said.

Speaking at a conference in Hanoi last week, Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien said many SMEs often complained that they found it difficult to get bank loans without stopping to think why.

Statistics showed that only 15 percent of applications for loans are rejected, mainly because the companies who lodged them didn’t meet eligibility requirements, Tien said.

The Vietnam Industry and Trade Bank, or VietinBank, said the loans given to SMEs stood at about VND45 trillion (US$2.6 billion), accounting for 40 percent of its total loans.

OceanBank said 80 percent of its loans were to SMEs.

State-run Agribank, Vietnam’s largest lender, said credit growth for SMEs at the bank in the first 10 months increased by 14 percent over the same period last year.

All bankers attending the conference said they considered SMEs their target customers and they always tried to have flexible lending policies to attract more SME customers.

SMEs, or businesses with a capital of less than VND10 billion ($590,000) or having less than 300 employees, comprise around 90 percent of all enterprises in Vietnam. According to statistics released at another forum during last week’s SME National Week 2008 in Hanoi, SMEs have contributed more than 40 percent of the country’s gross domestic product and created jobs for nearly 3.4 million people.

Nguyen Thi Lan Anh, head of customer service at VietinBank, said there was no difference between a large and a small company and the only thing that mattered to banks was whether a company was creditworthy or not.

Even though VietinBank aims to become a leading bank in providing services to SMEs, it cannot give loans to companies without a strong equity base, transparent financial reporting and a feasible business plan, Anh said, noting it was important for them to show that they could meet the repayments.

Many bankers said businesses should stop thinking that they are asking for money and whether they are granted loans or not is a measure of the generosity of the banks.

Sacombank Chairman Dang Van Thanh said SMEs need to be more confident in their relationship with banks because they were the most attractive customers of not only banks but also other financial institutions.

Investment firm VinaCapital, for instance, said it was planning to boost investment into unlisted companies, most of which are SMEs.

The competition among financial institutions is fierce as they all want to attract as many SME clients as possible.

Agribank said it would cooperate with industry associations and provide long-term loans for SMEs to upgrade their production technologies.

Both OceanBank and Sacombank have recently launched new services to help SMEs restructure their financial systems.

Meanwhile, VietinBank said it is completing a credit rating system so that it can make lending decisions more easily later.

“If banks diversify their products and introduce suitable services to SMEs, they will be able to open the door to the most promising credit market,” OceanBank Chairman Ha Van Tham said.

With credit growth recently slowing down, the need to attract more SME customers has become even more urgent for banks. Many banks said they are having difficulties managing a surplus of capital set aside for loans.

Trang Thi Thuy Lien, general director of Lien Phat Footwear Company, said many SMEs like hers are not seeking bank loans at the moment.

The global economic slowdown has hurt the company’s exports to Europe and so it was cutting back on production, rather than expanding, she said.

Mai Tong Ba, director of Asia Commercial Bank’s Saigon Branch, said there were no businesses applying for new loans at the branch and its credit growth was now only about 20 percent over the same period last year.

Huynh Song Hao, deputy director of Vietcombank Ho Chi Minh City, said although banks have lowered lending rates, businesses don’t want to borrow.

The State Bank of Vietnam cut three percentage points off its benchmark rate in the four weeks to November 20, prompting commercial banks to lower their lending rates.

The current lending rates among commercial banks are 14-15 percent per year. Last year, the highest annual rate was 12 percent.

Source: TBKTSG

Citigroup flop exposes folly of empire-building

Sandy Weill never dreamed Citigroup Inc. would end up as a ward of the government.

When he merged Citicorp and Travelers Group Inc. in 1998, Weill envisioned the ultimate financial-services empire – peddling checking accounts, stock brokerage, investment banking and commercial loans around the world.

Today, five years after his retirement as chief executive officer, Citigroup has collapsed under the weight of massive bad market bets.

After the company’s stock closed on November 21 at US$3.77, down 87 percent for the year, the US government threw more aid at the giant to prevent a run on the bank by customers.

The Feds agreed to back up $306 billion of Citigroup bad debt, covering 90 percent of losses after the bank absorbed the first $29 billion. The government also infused $20 billion into the bank with a purchase of preferred stock. That was in addition to the $25 billion of Citigroup preferred shares it bought in October as part of a plan to recapitalize US banks.

Citigroup’s failure undercuts the strategy of many US businesses. Bigger is better, CEOs argue. Only the big survive in a cutthroat world. What they don’t say is, I get paid more if my company gets larger. In the years 2000 through 2005, Sanford I. Weill took $83 million in bonuses for his work at Citigroup.

Weill and his successor, Charles Prince, might argue that they had bad luck. No one predicted the collapse of the credit markets that followed the excesses of the US mortgage business. Still, wasn’t the Citigroup financial powerhouse built to survive any crisis?

Better that they should acknowledge the colossus was a bad idea, and their own poor management. Citigroup’s $66 billion in write-offs for bad loans proves a reckless approach to investments. On Weill’s watch, Citigroup issued fraudulent reports on stocks and paid billions of dollars to settle charges it misled bond buyers.

The government may have let current Citigroup CEO Vikram Pandit remain at the helm because he has been in charge only since December – leaving most of the blame to Weill and Prince.

Citigroup shares Thursday rallied along with the rest of the stock market after the company’s second bailout, climbing to $5.95. Standard & Poor’s 500 Index also rose 6.5 percent that day.

US taxpayers can only hope this latest government move is the answer to the credit-market woes. If banks start trusting each other again, losses on the bad-loan deal with Citigroup might be minimal.

There’s also a chance the government will earn a little money for its efforts. For the new $20 billion in cash, it gets $27 billion in Citigroup preferred stock, paying an 8 percent dividend. The Feds also get an option to buy a 4.5 percent stake in Citigroup common stock.

Weill’s Citigroup stock prospered for a time after his merger, topping $50 on occasion. But the shares began falling steadily in the spring of 2007. Citigroup’s best strategy now may be to undo what Weill wrought and Prince tried to manage.

“We should be thinking about breaking this company up and redistributing the assets into stronger hands,” said Christopher Whalen of Institutional Risk Analytics, a research firm in California.

Let’s hope Bank of America CEO Kenneth Lewis is paying attention. Lewis bought Countrywide Financial Corp. to beef up in mortgages, and is buying Merrill Lynch & Co. to add stock-brokerage and investment-banking assets. Does he really want to mimic Citigroup?

Reported by David Pauly*

* David Pauly is a Bloomberg News columnist. The opinions expressed are his own.

Stock market poised to resume downward path

Investors at the Ho Chi Minh Stock Exchange heaved a sigh of relief at last Friday’s rally but analysts remain cautious, expecting the market to resume its slump this week.

The VN-Index, Vietnam’s main stock index, regained 11.2 points, or 3.69 percent, to close at 314.74 on Friday after diving to a three-year low of 303.54. The index has lost 66 percent of its value this year.

The HaSTC-Index of the smaller Hanoi stock exchange staged a rebound of 6.75 percent last week to close on Friday at 104.2 points. During the day, the index dipped below 100, the level it started trading at in 2006.

“It’s now impossible to know whether the VN-Index will fall below the resistance level of 300 points. But in my opinion, the market remains in a downward trend,” said Nguyen Ngoc Tuoi, CEO of Kim Eng Securities Co. “Therefore investors should think twice before trading stocks.”

Unlike the previous weeks, sentiment on Vietnam’s stock market last week didn’t track global markets but seemed to be focused solely on the domestic economy, said Fiachra MacCana, research director of the Ho Chi Minh City Securities Corp.

“Despite Wall Street’s recovery on November 21, the HCMC market still retreated on Monday over growing worries about a slowdown in the economy” said MacCana, adding investors will begin dumping shares even more heavily if the VN-Index drops below 300 points.

In its latest report, Vincom Securities Corp.’s research department also said the market would remain gloomy in the medium-term. “However, investor confidence is upbeat over the five packages the government announced to stimulate the economy, including a delay in collecting the capital gains tax until July next year, a cut in corporate income tax by 3 percent to 25 percent,” the brokerage said.

It also expects the market will rally in the short-term. “If the global markets don’t post any sharp falls, the rally may last until middle of next week,” Vincom Securities Corp. said.

PVD and steel marker stocks top picks this week

Oil driller PV Drilling (PVD) and Hoa Phat Group (HPG) could be among this week's gainers.

“Many investors have opted for PVD, which has shown a healthy recovery since June,” said Fiachra MacCana.

PVD, which offers technical services to the oil and natural gas industry, rose 3.6 percent on Friday to close at VND72,500. It was among eight stocks that rose on all five trading days last week. Technical analysis showed the firm’s share price will enter a new rising period.

Steel stocks, meanwhile, may move into positive territory after the Ministry of Planning and Investment increased the import tax of steel ingot to 5 percent from zero to protect domestic makers from overseas competition.

The ministry also proposed an increase in the imported tax of finished steel to 20 percent from the current 10 percent.

Along with Hoa Phat Group, the country’s largest steel producer, analysts expect other makers – including SMC Investment - Trading Joint Stock Co. (SMC), Vietnam - Italy Steel Joint Stock Co. (VIS), Viet Han Corp. (VHG) and Ho Chi Minh City Metal Corp. (HMC) – will be best choice for small-time investors.

Reported by Tuong Chau

Central bank to ‘manage’ currency to narrow trade deficit

The State Bank of Vietnam will pursue a monetary policy that may help narrow the country’s trade deficit amid concerns the economy may slow further.

“The State Bank is closely watching the market’s development to flexibly manage the dong’s exchange rate to help keep the trade deficit under control,” a statement on the central bank’s website said.

The government has cut its growth target to 6.7 percent for this year and 6.5 percent next year, compared with 8.5 percent in 2007. The trade gap in the first 11 months widened 56 percent to US$16.9 billion, with export growth slowing as stagnant global economies cut demand for the nation’s products.

“Other countries have been affected by the global financial turmoil more on the financial side,” Martin Rama, acting country director for the World Bank in Vietnam, said in Hanoi Friday.

“For Vietnam, the main question will have to do with exports and foreign investment.”

The State Bank set its reference rate for Friday’s dong trading at VND16,483 per dollar, compared with VND16,479 on November 24.

Banks are allowed to trade the currency by up to 3 percent on either side of the official rate. The dong traded at VND17,180 to VND17,230 in the free market in Hanoi, the central bank said in the statement, which reviewed this week’s money market.

Source: Bloomberg

Eximbank cancels 2009 listing on financial turmoil

Vietnam Export-Import Commercial Joint-Stock Bank, partly owned by Sumitomo Mitsui Financial Group Inc., has canceled its plan to list shares next year due to the global financial crisis.

“It is not a good time to list next year given both the domestic and world financial situations,” Le Thi Hoa, vice chairwoman of the lender known as Eximbank, said in an interview in Ho Chi Minh City Sunday. “We will consider better timing and seek approval from our shareholders later.”

The benchmark VN-Index has plunged 67 percent this year as foreign investors retreat from emerging markets amid a global recession. The government on November 6 lowered its growth target for next year to 6.5 percent from an earlier 7 percent.

The HCMC-based lender also reduced its registered capital target this year to VND7.2 trillion (US$425.5 million) from VND7.38 trillion ($436.1 million) planned in March, according to general director Truong Van Phuoc.

The bank would sell 297 million shares worth VND2.97 trillion next month to existing shareholders, Phuoc said.

As of the end of October, Eximbank had total assets of VND49.6 trillion ($2.9 billion) and its registered capital was VND4.2 trillion ($248.2 million), a 50 percent jump since the beginning of the year, according to a report released at a shareholders’ meeting Sunday.

Pretax profit was VND1.2 trillion ($71 million) in the first 10 months, an increase of 116 percent from a year earlier, the report said.

Eximbank has outstanding property loans of VND4 trillion ($236 million), or 18.2 percent of its outstanding debts, at the end of November, according to Phuoc.

It has sold a 15 percent stake to Sumitomo Mitsui, Japan’s third-largest bank by revenue, 5 percent to VOF Investment Ltd. of Virgin Islands, 4.5 percent to Mirae Asset Exim Investment Ltd. of South Korea, and 0.5 percent to Mirae Asset Maps Opportunity Vietnam Equity Balanced Fund 1, according to the report.

Source: Bloomberg

Agribank to help exporters buy 600,000 tons of rice

The central bank on Friday asked state-owned Bank for Agriculture and Rural Development (Agribank) to offer its cheapest loans to help exporters buy up to 600,000 tons of rice from local farmers.

Vietnam, the world's second-biggest rice exporter, is facing a rice glut, lower prices and reduced earnings for farmers, after it restricted exports earlier this year amid fear of a possible shortfall.

Agribank will offer loans at its “lowest lending rate” to Vietnam Southern Food Corp. and Vietnam Northern Food Corp., according to a statement on the State Bank of Vietnam’s website on Friday.

The government will pay the loans’ interest, the statement said.

Prime Minister Nguyen Tan Dung said earlier this month that Vietnam has 900,000 tons of rice in stock.

Vietnam had exported 4.39 million tons of rice, he said, adding the country expects to ship one million tons of rice abroad in the year’s last two months, raising the total export volume this year to five million tons, up about 25 percent over last year.

Higher rice shipments may help Vietnam sustain economic growth after the government pared targets for expansion this year because of surging inflation, a widening trade deficit and the global financial crisis.

Source: Thanh Nien

Vietcombank

Vietcombank, Vietnam's largest partly private bank, said Friday it would make a maiden dividend payment at the end of December, even though it has asked for shareholder approval to halve its 2008 credit growth forecast.

Hanoi-based unlisted Vietcombank, or the Commercial Joint Stock Bank for Foreign Trade of Vietnam, would pay an annualized dividend of 12 percent for a seven-month period ending this December, Chairman Nguyen Hoa Binh said in a statement.

Vietcombank completed the procedures to convert itself into a joint stock bank after it became the first state-run bank to conduct an initial public offering last December, raising US$652 million from selling 6.5 percent of its total shares.

The bank asked shareholders earlier this month to approve halving its credit growth projection this year to 15 percent from 29 percent, a sign that Vietcombank, which handles a quarter of Vietnam's trade payments, is feeling the effects of the global economic slowdown.

Vietcombank said it would pay the dividend in cash on December 25 for shareholders who registered by December 1. It gave no further details.

Vietnamese companies often pay dividends at the end of each half, but Vietcombank did not explain why it was launching a dividend program at this point.

Plans for a domestic listing in June 2008 have been delayed and Vietcombank has yet to give a new date.

Source: Reuters