Thursday June 12, 2008
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Vietnam a concern for Thai bankers
BBL, SCB and Exim monitoring exposure
SOMRUEDI BANCHONGDUANG & WICHIT CHANTANUSORNSIRI
Local bankers are watching nervously events to the east, where Vietnam appears to be on the verge of a full-blown currency crisis.
Wittaya Supatanakul, an adviser for the international banking group at Bangkok Bank, said the country's largest bank did not expect a significant impact if the Vietnamese dong were sharply devalued.
''[Bangkok Bank] will continue its current investment plan in Vietnam, although we along with other banks have been affected by the lack of liquidity in the market,'' he said.
The Vietnamese economy is teetering on the verge of a currency crisis as authorities wrestle with inflation as high as 25%, a sharp decline in the equities market and deteriorating economic conditions in the global market.
Based on forward contracts in the currency markets, the dong is up to 40% overvalued compared with the US dollar, as the country's trade and current deficits have soared due to the soaring cost of oil imports.
The State Bank of Vietnam on Tuesday announced a minor depreciation of 2% in the dong's official reference rate and a rise in policy interest rates to 14% from 12%. The rate hike also pushed the ceiling for deposit and lending rates to 21% from 18%, as the central bank tries to tighten monetary policy to slow economic growth and inflationary pressure.
The central bank has also moved to curb bank lending growth at less than 30% this year compared with 33% last year.
Limits have also been imposed on lending to the property sector and for margin lending for share trading to curb asset speculation.
The controls have hit asset prices hard, with property prices in Vietnam down 30% to 35% over the past six months. The Vietnamese stock exchange has also lost 65% in value over the past 14 months.
Mr Wittaya said Bangkok Bank had been ''slightly affected'' by the poor macroeconomic situation in the country, adding that its outstanding loans were primarily to Thai and other foreign investors in the Vietnamese manufacturing sector.
Bangkok Bank operates two branches in Vietnam. Its Ho Chi Minh City branch has outstanding loans of US$340 million and its Hanoi branch $110 million.
''The bank does have to be more prudent in doing business in the country, given the uncertainties about the dong and the economy. We will focus on monitoring and helping our existing customers rather than expanding lending,'' Mr Wittaya said.
Paspun Suvanchinda, an executive vice-president at Siam Commercial Bank, said the bank was taking a similarly cautious line.
SCB operates a joint venture with the Vietnam Bank for Agriculture and Rural Development, the country's largest state-owned bank, as well as with the CP Group.
The three partners hold equal shares in VinaSiam Bank, which operates six branches in Vietnam and a loan portfolio of around US$90 million.
At the Export-Import Bank of Thailand, officials said the quality of loans exposed to the Vietnamese market had not been affected to date.
Kittiporn Limpisvasti, an Exim Bank senior executive vice-president, said most of the bank's outbound projects to Vietnam were relatively small.
''But we are reviewing how the economic situation in Vietnam might affect credit quality and the viability of various business ventures,'' he added.
Mr Kittiporn said existing loans for Thai projects in Vietnam were all current. The Exim Bank also had another 10 to 20 million baht worth of exposure in the form of export guarantees, which to date have not yet been exercised.
''If the crisis deteriorates, we will likely stop our transactions. But the situation is not yet at that point,'' he added.
One problem facing outside analysts was in gaining accurate economic data about the state of the Vietnamese economy, Mr Kittiporn said.
Foreign reserve figures vary from as low as $15 billion to as much as $26 billion, depending on how the numbers are calculated. Trade deficit, at $14.4 billion for the first five months of the year, would seem to be highly alarming for the country's external finances, although authorities say the gap can be covered by foreign investment flows and aid from foreign countries.
''Certainly we hope that Vietnam can find a way to handle the crisis, and possibly learn from Thailand's own experience during the 1997 crisis,'' Mr Kittiporn said.
''Actually, one major difference between Thailand then and Vietnam now is the fact that in 1997, Thailand had huge foreign debt levels, much more than Vietnam has today.''
