Snakes and ladders credit game

The banking sector’s credit growth by July 30 had just surged more than 1 per cent, according to State Bank figures.

However, banks raced to declare their new credit growth indexes given by central bank upon their proposals. Most of them were commercial joint stock banks like OceanBank, TienPhong Bank or HDBank. Some foreign banks like ANZ and Sumitomo were also green-lighted for credit index extension.

OceanBank’s new credit growth index is 27 per cent, per year.

“The bank’s credit expanded 4 per cent in July against the previous month, driving the bank’s seven month credit growth to 18 per cent,” the bank’s deputy general director Nguyen Van Hoan revealed.

When some medium-size banks constantly asked for extended credit growth figures, bigger players said they could hardly achieve their allocated targets.

VietinBank director Nguyen Van Thang said the bank’s credit contracted 2 per cent in the first seven months.

VietinBank hopes its credit growth will resume from late August to help it reach a full-year credit growth target 10-12 per cent by the year’s end.

Vietcombank saw 5 per cent credit growth in seven months, so achieving a total 17 per cent credit growth target this year would be a challenging task to the bank.

Head of Vietcombank’s Capital Sources Business and Management Department Pham Chi Thanh said the bank could not scale up lending since qualified borrowers were scarce.

“Last week we offered customers some loan packages with merely 6 per cent per year lending rate. Finding good borrowers remains hardest duty now,” said Thanh.

Over a month ago, the State Bank demanded banks ease old loan lending rates to at most 15 per cent per year. This was good news to firms but it made bank profits ‘evaporate’.

For instance, the move cast a dent of VND1.2-1.5 trillion ($57 million-$71 million) in BIDV’s full-year profit, the figure was VND1.5-1.8 trillion ($71 million-$85.7 million) at VietinBank and around VND1.8 trillion ($85.7 million) at Vietcombank.

For joint stock banks the lost profits due to shearing old loan lending rates are reportedly smaller, but its implications are big. That was why commercial joint stock banks were striving to boost credit growth to hike their profit figures.

A central bank recent report said in some recent years credit organisations, particularly shareholding ones, have constantly hiked their chartered capital, pilling pressures on banks’ credit growth targets to ensure efficiency.

Some banks witnessed over 50 per cent annual credit growth when their risk management and loan supervision capacity remained limited.

“This year is challenging to banks. Thereby, banks reporting losses may not surprise anyone,” said senior banking expert Nguyen Tri Hieu.