Demand for loans of the economy often increases in the last six months. However, until now, many banks have approached the lending limit in 2019.
According to the State Bank of Vietnam (SBV) statistics, credit grew by 7.33 percent in the first six months of 2019. This is a good growth rate while credit growth of the whole system is at only 14 percent.
Credit grows in the right direction
Compared to the first six months of 2018, when credit growth reached 7.88 percentthe lowest increase within three years, credit growth in the first six months of 2019 was still evaluated effectively, with outstanding loans mainly focused on production and business and priority areas.
Bui Quang Tin, at Bizlight Entrepreneur School, said that that index should be assessed on the overview according to the general credit growth rule for each year. Accordingly, in the last months of 2019, credit growth would increase normally by two percent per month in the last three months (equivalent to six percent), particularly in the third quarter, it usually increased about three percent to four percent. If according to the rule, the credit limit will soon be approached, however, SBV will adjust flexibly based on many different variables.
To achieve good credit growth in the first six months of 2019, many banks boosted lending. Therefore, the growth rate in many banks exceeded the credit growth limit allowed by SBV.
According to estimates, some banks in the group of nine banks with Basel II standards, such as Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam International Commercial Joint Stock Bank (VIB), Orient Commercial Joint Stock Bank (OCB), Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), Military Commercial Joint Stock Bank (MB), Asia Commercial Joint Stock Bank (ACB), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) and Vietnam Maritime JointStock Commercial Bank (MSB) had high credit growth. In particular, Vietcombank loans reached nine percent on 15 percent of the credit limit; OCB had credit growth of up to 18 percent on the 20 percent limit. VIB credit growth mainly based on retail lending (accounting for 78 percent) achieved outstanding loan growth of 21 percent.
Restructuring credit institutions had tight lending limit to match the capital adequacy ratio (CAR) and set up risk provisions and handle bad debts. This helped ensure a healthy operation of the bank.
Currently, some credit institutions in group two and group three also increased their outstanding loans or even out of limit. For example, Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) had a credit limit of only seven percent but used almost six percent in the first three months of 2019.
How to extend the credit limit?
Belonging to group one with Basel II standard, ACB just announced that it had extended the credit limit by four percent, reaching 17 percent. Accordingly, ACB will have eight percent of lending limit to grow in the remaining five months.
ACB’s case made many credit institutions expected to create a precedent for loosening credit limit. However, not all credit institutions meeting Basel II standards can be considered to open up as expected. For example, despite the Basel II standards, MSB is in the IPO roadmap, there will be no special priority for credit growth.
Meanwhile, some credit institutions are trying to carry out plans to increase capital and improve CAR to be considered by SBV to increase credit limit. In which, Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), with credit limit of only six percent to seven percent in 2019, is considered to continue to tighten the growth of revenue and profit. Therefore, if Vietinbank does not promote capital raising solutions, it will not be removed.
In general, banks that normally had an average lending limit of 14 percent, also had positive credit growth in the first six months of 2019. However, these organisations are unlikely to place significant expectations with higher credit limit. They themselves will have to prioritise the settlement of Vietnam Asset Management Company (VAMC) bonds and recover debts, ensure collateral assets, towards the Basel II standard according to the roadmap.
Bui Quang Tin said that, besides calculating the flexible credit growth limit, SBV will also have the orientation to regulate the monetary and credit policies appropriately to support the economic growth, stabilise inflation, and support businesses.
Credit institutions themselves also had many ways to increase revenue such as increasing debt recovery, reserving provision, increasing service revenue, securities income, selling treasury stocks, etc. Therefore, the business of banks would not be impossible in high targets. In addition, the total credit growth in the basic system still had not yet reached the lending limit. Therefore, businesses would not worry about lack of capital, only banks worried about lack of good businesses.
