Credit target to be out of reach

Analysts are expressing doubt that Vietnam can meet its 12 per cent credit growth goal Photo: Le Toan

The banking system’s credit growth through August 20 was 5.4 per cent and total deposits of credit institutions increased 9.5 per cent, according to the General Statistics Office.

“We think that the target of a 12 per cent credit increase this year is very difficult to achieve,” said Alan Pham, chief economist at fund management firm VinaCapital.

In the first eight months of the year, credit rose 5.4 per cent or  0.67 per cent per month.  “Now to achieve an increase of 1.5 per cent per month for the rest of the year is a pretty tall order,” said Pham.

Pham added that any rush to increase lending over such a short time would lead to poor risk management, which Vietnam has already struggled with.

Maybank Kim Eng Securities (MBKE) said in a recent report that credit growth appeared to be slowing again.

Credit growth at the end of May was 2.98 per cent. The figure rose to 4.5 per cent by the end of June and 5.02 per cent by the end of July. “These figures show that credit has improved during the past few months but began to slow again in August with 5.4 per cent,” the firm stated.

Vietnam’s four big banks  -Agribank, BIDV, Vietinbank and Vietcombank - together account for 44 per cent of the banking system’s outstanding loans and hardly saw any credit growth.

In the first half of the year, Agribank saw credit growth of 4.2 per cent, BIDV  7.6 per cent, Vietinbank 0.37 per cent and Vietcombank minus 1.5 per cent, according to MBKE.

The MBKE report also said the loan default rate (LDR) of the whole system fell from 89.36 per cent early this year to 87.3 per cent in the first six months. Therefore, with credit growth at only 5.4 per cent in the first eight months, MBKE said the target of 12 per cent for the whole year was unlikely.

VinaCapital’s Pham said the State Bank seemed to think that credit growth could  be pushed up simply by encouraging banks to lend more. “However, banks find that more lending is not in their interest, because loan rates have declined significantly this year. So it is no longer profitable to offer loans. Also, more lending can lead to more non-performing loans (NPLs), and banks are now very careful about adding to NPLs already on their books.”

Meanwhile, the State Bank still expressed optimism about credit growth of 12 per cent for the whole year.

Nguyen Thi Hong, head of the Monetary Policy Department under the State Bank, said that in recent years, credit often grew higher in the last months of a year and “it is likely the country reaches its target of 12 per cent for the whole 2013.”