Banks ask for more credit growth room to prepare for the peak season

17-Sep-2020 Intellasia | Bao Dau tu | 6:02 AM Print This Post

The credit growth in the first half of 2020 is only half of the same period of last year, and is forecasted to be about nine to 10 percent for the whole yea, but banks still ask for credit growth room loosening to welcome the end of the year business season.

According to data released by the State Bank of Vietnam (SBV), as of July 28th, the mobilisation of the entire banking sector increased by 5.31%, credit grew by 3.45 percent compared to the end of 2019 (7.13 percent in the same period of last year).

The SBV’s Governor Le Minh Hung said that the extension of credit growth room for banks with healthy growth conditions was implemented in early July 2020 to boost the economic growth. Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Vietnam International Commercial Joint Stock Bank (VIB), Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Tien Phong Commercial Joint Stock Bank (TPBank) and Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) were all approved to raise credit growth room to 19 23%. Military Commercial Joint Stock Bank (MBBank)’s credit growth limit was also adjusted from 11.75 percent to 20%, while that of Sacombank was increased to 14%.

Financial expert Huynh Trung Minh said that it is reasonable for the SBV to loosen the credit limits for credit institutions (CIs) but banks must ensure efficiency when lending. To effectively offer loans and recover capital, banks must find effective projects for disbursement.

Banks are currently focusing on restructuring according to Circular 01/2020/TT-NHNN. As of mid-June 2020, the total restructured outstanding loans reached 172 trillion dong, equivalent to two percent of total outstanding loans.

Report of BIDV Securities Company (BSC) stated that many banks were approved to increase credit growth to high limits, but the credit growth this year would be only nine percent. Banks have reduced the proportion of lending to individuals and small and medium-sized enterprises (SMEs), focused on lending to large businesses with resistance to overcome the pandemic.

Regarding this issue, Vietcombank Securities Company (VCBS) said that the SBV has loosened credit growth limits for some banks, but the credit growth of the entire system will be less than 10 percent in 2020.

Meanwhile, the research team of Saigon Securities Incorporation (SSI Research) has released a report assessing the outlook for the banking industry in the second half of 2020. Accordingly, the credit growth will slow down in the second half of the year. It is estimated that by the end of July 2020, the total credit growth slightly increased by 3.7 percent compared to the beginning of the year, equalling to half of the 7.5 percent growth rate in the same period of 2019.

With the above judgment, SSI Research estimated that the credit growth in 2020 will be around 7.5 8.5%, lower than the original credit growth target of the SBV of 11 14 percent compared to the same period of last year. The credit demand may continue to weaken as the country is facing the second wave of Covid-19, while banks may not lower their credit granting standards.

In fact, the low credit growth declined in the context of the economic recession, banks have become more cautious in disbursement and credit demand has gone down. However, banks still want to have more room for lending to prepare for the business season in the end of the year.

General director of Sacombank Nguyen Duc Thach Diem said that due to the impact of the Covid-19 pandemic, customers’ demand for capital did not increase dramatically. At the beginning of the year, Sacombank’s credit growth was assigned at only nine percent and in the first six months of the year, the bank’s outstanding credit growth was approximately six percent. Thus, the bank has only three percent left in the credit growth room, so it has proposed the SBV to extend the room to 14 percent in order to have more room for lending from now to the end of 2020.

Meanwhile, state-owned banks including Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) and Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) as well as private joint stock banks including Asia Commercial Joint Stock Bank (ACB) and Export Import Commercial Joint Stock Bank (Eximbank) did not increase the credit growth room. The reason is that the outstanding loans of these banks compared to that of private joint stock banks is very large. For example, at Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank), if the bank’s credit increases by one percent, the outstanding loans may go up by 10 trillion dong, approximately equivalent to the outstanding credit of a small-scaled bank like Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank), of which the outstanding loans decreased by 2.79 percent to 14.151 trillion dong as of June 2020.

Experts of VCBS said that the decline of credit demand in the short term and the caution of large-scaled banks in granting new loans resulted in the need to seek joint stock banks with good capital source, reflected in the ratio of Capital Adequacy Ratio (CAR).


Category: Finance, Vietnam

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