Credit growth may reach 12-13 per cent in 2021

First-quarter credit would hardly jump in the first quarter due to still low aggregate demand

According to figures from Hanoi Statistical Office, credit only expanded by 0.6 per cent in the first two months of this year. The total outstanding balance reached VND2.217 quadrillion ($96.06 billion), up 0.2 per cent on-month.

Banks share that usually the demand for credit in the first quarter tends to increase slower than in the remaining quarters, making it hard to raise deposit rates.

Interest rates have reduced despite good liquidity and idle money flowing into banks. The State Bank of Vietnam (SBV) said, in January-February, total mobilised capital volume in Ho Chi Minh City grew 0.3 per cent compared to the end of last year.

Financial analysts noted as credit growth is slow, banks will likely not raise deposit rates for some time.

Nguyen Dinh Tung, general director of Ho Chi Minh City-based Orient Commercial Joint Stock Bank (OCB), shared that the appetite for capital is generally not high in the first quarter. In addition, credit institutions have reduced costs to cut interest rates based on the SBV’s policy to assist borrowers in the context of COVID-19. As a result, the deposit interest rate remains stable.

Banking expert Nguyen Tri Hieu commented that lending interest rates would only decrease slightly. Banks posted high profits last year due to high net profit margins and lower deposit interest rates. However, rising interest rates and promoting consumer lending at the same time will be challenging.

The State Bank has set the banking industry credit growth at about 12 per cent. The goal, however, is not fixed and may be adjusted if necessary.

As the pandemic is being gradually contained, banks expect credit growth in the forthcoming quarters, with lending focusing on priority areas of production and business.

SSI Securities Corporation (SSI)’s recent assessment shows that banks will continue to benefit from lower-cost capital as the deposit interest rates have lowered by 2-2.5 per cent in 2020. The credit growth would reach 12-13 per cent this year.

Tung from OCB added that his bank would follow its retail strategy with loans prioritising small- and medium-sized enterprises and trading households. Besides, the bank will build separate products and services catering for each customer group.

Le Duc Tho, chairman of VietinBank, one of the four leading state commercial lenders, noted the bank targets credit growth at 8-11 per cent this year, but it also depends on market conditions and the SBV’s monetary policy.

Meanwhile, privately-held LienVietPostBank said that the bank will continue implementing its retail strategy, concentrating on lending for priority areas such as agriculture and rural development, green and high-tech agriculture which are less affected by the COVID-19 epidemic, so the efficiency of lending would be high.

According to Tran Du Lich, a member of the National Financial and Monetary Policy Advisory Council, a sharp drop in interest rates would not boost credit as the aggregate demand remains declining. Besides, lending activities should be monitored carefully to limit bad debt emergence.