Commercial banks propose SBV to set higher credit growth limit

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Running out of lending room

In the first half of 2017, Vietnam International Commercial Joint Stock Bank (VIB) has almost reached the lending growth cap of 16 per cent. Its outstanding credit balance was nearly VND75.7 trillion ($3.3 billion), an equivalent credit growth rate of 15.7 per cent. Most of VIB’s credit growth derives from retail loans, which rose more than 30 per cent compared to the end of 2016. Thus, while the cap for VIB was 16 per cent for the whole year, VIB’s credit growth has been 15.7 per cent in the first half.

Han Ngoc Vu, general director of VIB, said that the bank proposed SBV to raise the credit growth limit. If the proposal is approved, VIB will have more room for lending, especially at the end of the year when the demand for borrowing usually increases.

After the first six months of 2017, Vietnam Prosperity Joint Stock Commercial Bank (VPBank)’s credit growth rate was 12 per cent, increasing from VND144 trillion ($6.3 billion) at the end of 2016 to VND162 trillion ($7.1 billion) at the end of June 2017.

Thus, in the second half of 2017, VPBank has only 4 per cent room for lending, while this period often sees an increasing demand for borrowing. At the end of the year people usually have higher demand for shopping and this is a chance for banks to expand market share in the credit sector and boost profit.

VPBank earned a consolidated pre-tax profit of nearly VND3.3 trillion ($145.2 million) in the first half of 2017 thanks to its credit growth. This profit exceeded the target for the first half by 10 per cent and is equivalent to an increase of 107 per cent compared to the same period last year.

Meanwhile, Do Minh Toan, general director of Asia Commercial Joint Stock Bank (ACB), said that in the first half, ACB had reached nearly a half of the maximum credit growth rate and it is proposing SBV to extend its room for lending.

To extend or not to extend?

As the credit growth rate increased significantly in the first half, there have been concerns over credit growth spinning out of control. In previous years, banks’ credit growth significantly increased at the end of the year, instead of in the first half. With the current growth rate, credit growth may far exceed the target of 18-20 per cent initially set by SBV.

However, according to some banks, at early 2017, SBV set the credit growth rate of 15-16 per cent instead of the 18 per cent in previous years. The reason is that SBV wanted to control the credit rate at the beginning of the year to control the money supply and stabilise inflation.

From now till the end of 2017, if the macro-economy is getting better with a more stable inflation, SBV may set a higher lending growth cap for banks.

Meanwhile, according to Pham Hong Hai, general director of HSBC Bank (Vietnam) Ltd. (HSBC Vietnam), the credit growth rate of 16 per cent set at the beginning of the year may mean that SBV is reluctant to go for the usual 18 per cent.

Dr. Bui Quang Tin from the Business Administration Faculty of Banking University of Ho Chi Minh City agreed that the current credit growth rate is appropriate to the targets and orientations of SBV.

Also, he added that during the rest of 2017, SBV will keep controlling the credit growth of the whole banking system to ensure safety and efficiency. However, SBV will have to implement some adjustments to reach the targets set by the National Assembly and the government in 2017.