2008: banking sector faces hardship due to economic fluctuation

     A year full of many difficulties for the banking sector

Enterprises had difficulties in accessing loans from banks

 The year 2008 was considered as a difficult year for the banking sector. From the beginning of 2008 until now, the global and national economic crisis has deeply impacted on production and business activities in the province. The difficulties in accessing credit capitals from banks of enterprises have led to the fact that customers did not intend to pay off their mature loans. These difficulties have made loan balance in the province drop, but the bad debt is likely to increase. Particularly, the loan balance rose by 14.32% in the first 5 months compared to that of the earlier 2008, and the outstanding loans took a further drop since 1^st June. The disbursement process was hard hit. This was driven by the economic downturn, slow goods consumption, and a weak capacity to absorb capital inflows. Hence, the credit growth speed of banks in 2008 recorded the lowest level during the past 5 years, just up 14.32% compared to the last year (meanwhile the target rate in 2008 was expected to increase 25-27%). The loan balance rate of state-owned credit institutions was 49.91%, followed by joint stock banks of 40.99%, joint venture banks of 4.49%, social policy banks of 2.89%, and people’s credit funds of 1.72%. Regarding the credit quality, the overdue loan was VND2,497 billion as of December 2008, of which bad debts reached VND886 billion, occupying 3.14%, and bad debts in group five (loss debts: debts that are uncollectible) were VND231 billion, accounting for 0.85%.

  The reason of bad debt hike was from anti-inflation policy, banks cut credit limit. When the credit interest rates were hiked, enterprises had difficulties in getting loans, resulting in a hike in product prices and a decline in profits. Therefore, the financial capacity was also decreased, and enterprises could not complete the plan to repay loans to banks, and then the overdue debts were raised to a sudden level. The banks had to adjust or extent loan terms and transfer overdue loans to appropriate bad debts for the crisis-hit enterprises. Some credit institutions have not yet surveyed customers carefully when offering loans, leading to the fact that they provided customers with loans for wrong purpose, then borrowers did ineffective business and were at risk of going bankrupt, thus it was difficult or unable for banks to take back principle and loan interest.

      Overcoming difficulties and keeping development target

The banking activities in Dong Nai province has still experienced a development period especially in term of services, in spite of a lot of obstacles caused by objective conditions. The payment services have developed at high rate with over 400,000 deposit accounts from economic entities and individual customers. Besides traditional payment methods, the online payment services have been strongly developing and become more popular with various utilities of quickness, accuracy, safety and confidentiality, meeting the demands of customers in the relationships of commerce and payment at home and abroad.

The banking activities in Dong Nai province still have been well-developed in spite of many difficulties.

  The banking sector’s payment system continued to be applied to advanced technology in the direction of automation, service expansion as well as application scope. In the late November 2008, the interbank payment system phase 2 have been officially implemented, making contribution to expanding and improving the payment quality and capital transfer in the province. In 2008, the interbank payment system performed 8,596 electronic remittance transactions with the amount of about VND1,6 billion; 396,228 clearing payment transactions and 482 concentrated payment transactions with VND570,552,390 billion and VND389,012,993 billion respectively. By the end of November 2008, 18,000 bank cards have offered to those who receive their salaries from state budget in the province with a total number of more than 482 thousand cards. Moreover, 191 ATM machines have been installed and 87 POS machines have been also put into operation in service of the payment transactions at supermarkets and restaurants. The import-export payment activity of the province gained US$2,750 million this year, and the foreign capital pouring into Dong Nai province reached US$103 million.  The cash budget activity reached VND182,368 billion, a 80.37% increase against the year 2007. The total cash flows achieved VND178,075 billion, up 75.45% over the last year, yielding VND4,293 billion. Consequently, the pre-tax profit of credit institutions in the province totaled up to VND733 billion, a 12.77% rise over the last year, of which the profit from services earned VND212 billion, increasing 52.52%.

 Reported by N. Thuong, Translated by Minh Minh