Consumer lending may salvage credit growth target

illustration photo

The rise, according to banks, is thanks to consumer lending. “This growth is mostly due to individual customers, who account for more than 50 per cent of banks’ total lending,” said a representative from Sacombank, which saw its total lending rise by 15 per cent in the first 11 months of this year.

According to the source from Sacombank, businesses are still not seeking much capital, despite the fact that this time of the year is generally the hottest time for them to take out loans to fuel their production in preparation for Tet. Meanwhile, as interest rates on home loans continue to go down, alongside falling real estate prices, demand is on the rise. Homebuyers account for 15 per cent of Sacombank’s total retail lending.

“The most common interest rate on loans for homebuyers is currently between 8 and 10 per cent per year, very reasonable compared to two years ago,” said Sacombank deputy general director Nguyen Minh Tam.

At VPBank, consumer lending through its subsidiary financial company FE Credit contributed the majority to the bank’s 34.8 per cent credit growth in the first nine months of 2014, reported the bank’s website. “FE Credit expects an increase of 140-150 per cent in the number of loans by this year-end,” said FE Credit’s acting CEO Kalidas Ghose.

At Techcombank, retail banking accounted for 40 per cent of the bank’s total lending this year, reported acting CEO Do Tuan Anh. Anh said the bank’s solid performance was thanks to its focus on increasing the quality of services and tailoring its products to meet customer demands, particularly those of individual customers. He said that in the near future the bank would continue to boost lending to this segment.

According to banking experts, lending small sums to several customers is safer than lending big sums to a few customers. Also, when money is distributed over several loans, there is more control over the interest margin.

Given this breakthrough in credit growth statistics, the 12-14 per cent credit growth target for this year may well be in sight. However, “credit quality is more important than quantity,” noted banking expert Nguyen Tri Hieu. He added that the government should be realistic in its lending goals and not make credit growth its only focus.

“It’s more important that credit goes into the five prioritised sectors, agriculture and rural areas, exports, supporting industries, small and medium enterprises, and high technology.”