Banks in search for additional credit growth space

As the end of the year is approaching, many companies are in need of capital to finalise their orders or expand scale to accommodate the high season of New Year and Vietnam’s Lunar New Year. Banks that have hit their credit growth target request the State Bank of Vietnam (SBV) to extend their credit quota so that they can meet the high credit demand from customers.

Banks in search for additional credit growth quota

Nguyen Dinh Tung, general director of Orient Commercial JSB (OCB), said that the remaining space for credit growth for the year is not sufficient. Therefore, OCB, along with many other banks, are petitioning the SBV to raise their credit growth quota to boost lending during the peak business season.

Vietcombank’s credit growth, as per its interim financial report for the third quarter, was 15.6 per cent, 0.6 percentage point higher than the target of 15 per cent set at the beginning of the year.

Given the credit growth targets ranging from 14 to 15 per cent set by the SBV, a number of other major banks have also exceeded or were inching towards the limit by the end of the first nine months. They include Tien Phong Commercial JSB (TPBank) with its credit growth recorded at 16.4 per cent, Ho Chi Minh City Development Bank (HDBank – 15.7 per cent), LienVietPostbank (14.5 per cent), Vietnam International Commercial JSB (VIB – 13.6 per cent), Vietinbank (12.8 per cent), BIDV (11.8 per cent), Asia Commercial Bank (ACB Bank – 11.3 per cent), and Military Commercial JSB (MBBank – 11.2 per cent).

HDBank, which is currently in the process of merging with Petrolimex Group Commercial JSB (PGBank), expects the SBV to grant it a higher credit growth target by the end of the year.

The bank has sent its request to the monetary authority to adjust its credit growth target to 22 per cent in 2018 and is currently waiting for a response. In the third quarter of 2018, HDBank’s credit grew slightly by 0.4 per cent compared to the previous quarter, which was largely due to the impending quota it was assigned at the start of 2018.

Techcombank, meanwhile, has been the first bank to be approved by the SBV to have its credit growth quota lifted from 14 to 20 per cent. The Hanoi-based lender will accordingly have an additional VND6-8 trillion ($260-347 million) for lending in the last month of 2018.

According to Nguyen Le Quoc Anh, CEO of Techcombank, the year-end season often comes with high borrowing demand from businesses, particularly from small- and medium-sized enterprises (SMEs). Thus, his bank has set aside a large amount of capital to meet the rising demand.

Techcombank’s example encouraged other banks to turn to the SBV with similar requests. However, not all of them will be approved, as experts said that only healthy banks with low bad debts ratio, high profit figures, a widescale network, and sound financial capacities stand a chance, and those that have not committed any wrongdoings in the past.

At the beginning of the year, the government set the economic growth target of 6.7 per cent in 2018 and inflation at about 4 per cent. The SBV’s targeted credit growth this year is 17 per cent, which is deemed in line with the country’s macroeconomic performance.

According to Bao Viet Securities Company (BVSC), credit growth in the next 3-5 years will remain at the level of approximately 14 per cent per year, lower than the average 18.1 per cent in 2015-2017 due to reduced credit demand from the customer side and tightened credit supply from the lender side. Demand for credit in 2019 is expected to slow down as economic growth in 2019 is forecasted to stay at 6.4-6.5 per cent, lower than the forecast for 2018.

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