In recent years, credit growth had been assessed appropriately, controlled according to goals, while ensuring high economic growth. However, due to the current epidemic situation, banks expected the State Bank of Vietnam (SBV) to quickly extend the threshold of credit balance.
Banks ran out of capacity for loan growth
Talking to the Securities Investment Review Newspaper, Nguyen Duc Vinh, general director of Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) said, up to the present time, the credit growth of the Bank had reached more than 12%, while the limit of the year assigned by SBV was at 13%. Notably, VPBank’s loan balance from the beginning of the year had shifted to customers who were less affected by the disease. VPBank had nearly reached its credit growth ceiling and was asking for more, Vinh said.
According to Tien Phong Commercial Joint Stock Bank (TPBank)’s Annual general Meeting of Shareholders 2020, by the end of April 2020, the Bank’s loan balance reached 11%. While according to the limit assigned by SBV at the beginning of the year, the credit growth capacity had only 0. 5 percent left to reach the limit. The bank leader wanted credit growth to be further allocated to 15%.
Pham Doan Son, general director of Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank), shared, as of May, the Bank’s credit growth was about five percent, nearly half of the level assigned by SBV at the beginning of the year (nearly 11%). Son said, the Bank always had to control the credit growth to follow the regulations of SBV. He added that LienVietPostBank must wait for the signal of SBV to extend the credit room this year to decide whether or not to boost lending. Sharing the common view, a senior leader of a joint-stock bank said that although income from services had improved over time, 70 percent to 90 percent of banks’ profits still came from credit activities, so it was understandable that banks expected to extend credit threshold.
Talking to the Securities Investment Review Newspaper, the general director of a joint-stock bank said, this was the time to restore business operations, but when touching the ceiling of credit growth, banks did not dare to promote lending. The solution that was often mentioned was to collect debts from old customers for new loans. However, old customers were still not sure where to get money to pay debts, how to claim debts. The remarkable point was that the credit disbursement of Q1/2020 was mostly related to the control of credit growth in 2019.
Also, according to the above leader, the extending of credit threshold at this time was necessary for the context of positive funding sources since people did not have any more effective and safer investment channels than depositing bank money. However, deposit rates were on a downward trend. If there were no expansion of credit growth limit, businesses would face troubles, the banking system would, and so would the economy. At present, export was complicated, but the demand for investment and production of goods in the country was still high, so the actual demand for credit was still significant, said the general director.
The Covid-19 pandemic harmed all aspects of the country’s socio-economic life, affecting all industries and businesses. For banking, credit in the first months of the year tended to increase lower than the same period of previous years. Specifically, in 2020, January increased by 0.1%, February increased by 0.07%, March increased by 1.1%, April increased by 1.42 percent compared to the end of 2019 (the same period of 2019 increased by 4.44 percent ). On 20/5, credit balance increased by 1.32%.
In 2020, SBV provided credit for banks and other credit institutions estimated at 10.1%, lower than the 13 percent set earlier in the year due to the impact of the disease. However, some argued that the credit growth room should not be loosened as it might cause inflation to return. Besides, in the figures of credit growth and the gross domestic products (GDP) over the years, high credit growth had not been in parallel with the economic growth. For example, in 2016, credit growth reached 18.25%, while economic growth reached 6.21%; in 2017, it was 18.28 percent and 6.81%, respectively; in 2018, it was 13.89 percent and 7.08%; in 2019 it was 13.65 percent and 7.02%.
In this regard, Nguyen Tri Hieu, an economist, said that he supported raising the credit limit and accepting inflation risks in return for maintaining economic growth, especially in times when economies were at risk of recession, including Vietnam.
Continue to control credit activities strictly
SBV Governor Le Minh Hung said that from 2016 up to then, the credit structure had had a positive adjustment, in which credit mainly focused on the field of positive contributions to economic growth such as production business. Specifically, from 2016 through 2019, the average credit to industry increased by 9.17 percent per year, accounting for over 20 percent of the total balance of the economy; credit of construction industry increased by 12.76 percent on average, accounting for 9.64%.
The credit of the trade service sector grew steadily, reaching an average of 18.6 percent per year, accounting for 57 percent to 62.5%, of which the wholesale retail of car and motor; the repair of cars, motorbikes and other motor vehicles sectors had the highest balance, accounting for 16.7 percent to 20.5 percent of the total outstanding loans.
By the end of March 2020, industrial credit increased by 2.11 percent compared to the end of 2019, accounting for 19.19 percent of total loans; credit of construction industry increased by 2%, accounting for 9.84%; credit for wholesale retail, repair of automobiles, motorbikes and other motor vehicles increased by 0.45%, accounting for 20.31%, said the Governor.
For priority areas, the Governor said, on average, between 2016 and 2019, credit for agriculture and rural areas increased by 19.83%, accounting for about 22 percent of total outstanding loans. Small and medium enterprises increased by 16.35%, accounting for 19%. Exports grew by seven percent, accounting for 3.2%. 19.57 percent was the growing rate of the supporting industry, equal to 2.81%. And high-tech enterprises increased by 2.6%, accounting for 0.42%.
Temporarily as of the end of March 2020, due to the impact of Covid-19 epidemic, the balance of priority fields did not increase as much as the same period in 2019, when credit in agriculture and rural areas increased by 0.86%, the proportion of 24.8%; small and medium enterprises decreased by 1.2%, accounting for 19.2%; exports increased by 3.74%, accounting for 2.99%; supporting industry increased by 1.38%, accounting for 2.83%; high-tech companies increased by 5.42%, accounting for 0.39%.
In particular, credit for risky areas continued to be strictly controlled. Credit balance in the real estate sector was higher than the growth of total credit balance, but focusing mainly on outstanding loans for self-use purposes.
The proportion of balance for real estate business purposes in the total real estate loan balance was declining (as of December 31, 2017, it was 45.63%, until December 31, 2018, it was 35.49%, and as of 31/Dec/2019 it was 32.95%). The Governor expressed, by the end of March 2020, credit for the real estate sector increased by 1.23 percent compared to the end of 2019, accounting for 19.31 percent of total outstanding loans. In particular, the credit balance for housing needs accounted for about 62.43 percent of the real estate credit balance. Also, credit growth for the field of investment and securities trading in 2018 was 14.7%, which, in 2019, was 6.79%.
By the end of March 2020, this sector decreased by 0.92%, accounting for 0.36 percent of total outstanding loans. Credit growth for life control was 48 percent in 2016, 36.07 percent in 2017, 29.59 percent in 2018 and 19.49 percent in 2019. By the end of March 2020, credit in this sector increased by 0.26%, accounting for 20.44 percent of total loans.
On average, from 2016 through 2019, outstanding loans of the build-operate-transfer (BOT) projects and transport sector increased by 10.82%, accounting for 1.51 percent of total loans. The growth rate decreased sharply over the years, and the proportion also declined. By the end of March 2020, outstanding loans in this field increased by 1.27%, accounting for 1.35%, said the Governor.
