Soaring dollar lending rescues credit growth

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By the end of October, banking sector credit grew 8.63 per cent, mostly from lending in US dollars, which rose more than 20 per cent in the period.

Dollar lending is forecast to maintain its growth over the last two months of the year, as the demand for production-related imports and exports surges towards the New Year.

Vietnam International Bank (VIB)’s general director Le Quang Trung said the bank’s dollar lending rose steadily over the past few months on the back of a major disparity between Vietnam dong and dollar lending rates.

An executive of a joint stock commercial bank based in Hanoi said, “Most banks have reported ample capital sources amid the growing pressure of running profitably. As a result they have put greater effort into lending, particularly in dollars, to take advantage of lower rates and more borrowers.”

Foreign currency lending at many banks has reportedly grown at 20-30 per cent so far this year.

A source from leading local financial institution Vietcombank admitted that dollar lending has ‘rescued’ the bank’s credit growth in this year’s first half, with lending in Vietnam dong inching up a mere 0.44 per cent but that in dollars spiking 25 per cent.

Senior economist Le Xuan Nghia said strong dollar lending growth is a positive sign for the economy, reflecting healthy import-export performance.

According to head of the State Bank of Vietnam’ Credit Department Nguyen Tien Dong, soaring foreign currency lending over the past few months is well within the central bank’s control.

“Outstanding loans in foreign currencies remain modest, currently at 15 per cent of the total. The State Bank has only allowed banks to lend dollars to firms that also earn in foreign currencies, to ensure banks are not at risk of losing their dollar liquidity,” Dong said.

“Over the long haul, the State Bank will be steadfast in its anti-dolarisation goals, but will also take flexible approaches to each specific period,” he added.