Fears rise as credit flow slows to a trickle

The dip in credit growth has been attributed to weak market demand and massaged figures from the banks

Total credit growth as of July 18 marked a new low of just 3 per cent while growth for the year’s first half increased just 3.52 per cent against the figure for the end of 2013.

The Hanoi Statistics Office estimated July’s outstanding loans equalled VND927 trillion ($44 billion), down 2 per cent against the year-end of 2013. The figure for the first half of 2014 was announced at VND967 trillion ($46 billion) – a rise of 2.4 per cent in comparison with the 2013’s year-end figure.

“Credit growth in July will be much lower than the previous month,” said a local bank leader who declined to be named.

Nguyen Hoang Minh, deputy director of State Bank of Vietnam (SBV) branch in Ho Chi Minh City, said without the contribution made by Ho Chi Minh City’s growth, the scenario would be even more worrisome.

Minh revealed that the city’s credit volume rose 2.84 per cent in the first half. About 40 per cent of the $0.74 billion contracted with 700 businesses was successfully disbursed within June and July.

The fast downward trend in credit growth has been blamed on weak market demand and supposed ‘adjustments’ by banks in their released figures.

“The economy is still facing a lot of challenges, ranging from weak demand to modest capital-absorption capacity, leaving credit growth at a low level,” said Vo Tan Hoang – Saigon Commercial Bank’s general director.

Under data published by the Ho Chi Minh and Hanoi Statistics Offices, the consumer price index (CPI) in July rose only 0.12 per cent and 0.18 per cent month-on month, respectively.

An anonymous deputy director of a bank also suggested massaged figures weren’t uncommon in the banking sector. “Banks often provide more positive figures for their first-half reports, the real figures might not be so positive…the rebalance in July could account for the downward trend,” he added.

According to another financial expert, part of the reason for a slowdown in credit growth might stem from interbank transactions, which only offers improvement to the bank’s individual results, not the sector’s actual growth.

“In fact, the SBV had announced an on-year fall of 2 per cent in the whole fund balance, with this first half figure at only VND18 trillion ($0.86 billion),” said the expert.

SBV Governor Nguyen Van Binh earlier admitted that the year-end target of 12-14 per cent growth would be a major challenge for the sector. He added, however, that there was an official determination to achieve at least 10 per cent growth.