Will credit growth be less than 14pct this year?

09-Oct-2019 Intellasia | Tri Thuc Tre | 6:02 AM Print This Post

The recent survey of the State Bank of Vietnam (SBV) showed that credit institutions (CIs) have reduced their expectations of credit and mobilisation growth in the near future.

Specifically, the capital mobilisation of the whole CI system is expected to increase by an average of 4.39 percent in the fourth quarter (Q4) of 2019 and by 13.06 percent in 2019, down by 0.42 percent compared to the expectation in the previous survey (but still higher than the 12.45 percent recorded in 2018).

The outstanding credit of the banking system is estimated to grow by 4.85 percent in Q4 2019 and 13.61 percent in 2019, down by 0.72 percent compared to the expected average growth of 14.33 percent recorded in the previous survey (lower than the actual growth of 13.88 percent in 2018).

CIs have continuously adjusted down their outstanding credit growth in 2019 through the surveys, from 15.27 percent to 13.61 percent (in September 2019), close to the credit growth target of the whole industry in 2019.

Meanwhile, information of the SBV pointed out that both credit growth and mobilisation growth in the first nine months of the year tended to slow down, lower than the same period of last year.

Specifically, at the press conference on banking performance in Q3, the Monetary Policy Department said that as of September 24th 2019, the total means of payment (M2) increased by 8.58 percent over the end of 2018, while the credit growth reached 8.64 percent in the same period. In 2019, the SBV aims to expand M2 by about 13 percent, and credit by about 14 percent, adjusted accordingly with reality.

It can be seen that there is a big gap between the whole year orientation and the credit growth in the first three quarters of the year. The growth in the first three quarters of 2019 was also much lower than last year (9.52 percent), and was the lowest credit growth in nine months since 2014 until now. The annual credit growth from 2015 2017 was 10-11 percent.

It is known that at the beginning of the year, the credit growth limits assigned by the SBV to commercial banks were just popular below 13 percent. However, until the mid-year, some banks which soon met the Circular 41 on the capital safety ratios according to Basel II standards have been granted credit growth room expansion, although the expansion was insignificant.

Specifically, the SBV raised the credit growth limit in 2019 from 13 percent to 17 percent for Asia Commercial Joint Stock Bank (ACB), 12 percent to 16 percent for Vietnam Prosperity Commercial Joint Stock Bank (VPBank), 13 percent to 17 percent for Vietnam Technological and Commercial Joint Stock Bank (Techcombank), and 13 percent to 17 percent for Military Commercial Joint Stock Bank (MBBank).

Meanwhile, Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) the two banks with lending market share of nearly 25 percentrecorded lower credit growth compared to the common level. Particularly, VietinBank’s credit growth was only 2.4 percent in six months, and was allowed to increase credit by six to seven percent this year. The slowdown in credit growth of these two large banks will surely influence the entire market.

In addition, the recent exciting cooperate bond market has helped businesses reduce independence on banks’ capital sources. As estimated by Saigon Securities Incorporation, in the first eight months of 2019, the total bond offer reached 129.016 trillion dong, and the issuance value was 117.142 trillion dong. The winning rate of the entire market was 90.8 percent, and the market size sharply increased to about 10.2 percent of the Gross Domestic Product (GDP).

Although the credit growth tended to slow down, the positive point is that the GDP growth in the first nine months of 2019 was still the highest in nine years, showing that the current economic growth has been less dependent on bank loans compared to the previous time.

The slow credit growth will affect banks’ profit growth. However, at this point, holding back lending growth is essential as some banks will have to apply new capital adequacy ratio standards from the beginning of 2020.


Category: Finance, Vietnam

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