According to a bank leader, credit growth limits this year are quite diverse, up to 30 percent for some well performing banks. Meanwhile, many banks target at only six to eight percent.
To date, most banks have been assigned credit targets but only a few have revealed the specific numbers.
Large banks are reserved
Sharing with the Nguoi Dong Hanh, Nguyen Thanh Toai, deputy general director of Asia Joint Stock Commercial Bank (ACB), said the bank was assigned the target of 13 percent credit growth this year. In 2018, this bank grew credit by more than 16.4%.
Nguyen Dinh Thang, Chair of LienViet Post Joint Stock Commercial Bank (Lienviet Post Bank), did not specify the target of credit increase this year. However, according to the disclosure from him, it is less than the previous year. In 2018, the bank’s credit growth was nearly 18.5%.
He said that banks that met Basel II standards would be assigned high targets of 20%, 30%, and 40 percent because they could ensure safety, high risk management, and transparency. However, target for banks that are restructuring and having a large amount of bad debts is limited to six to seven percent.
From his view, banks’ credit growth limit this year is less than that of 2018. However, the State Bank of Vietnam (SBV) has a relatively clear policy to consider each bank one by one. Banks participating in specific projects of the government, the SBV, and the Ministry of Finance such as rural development and black credit elimination and restriction are expected to be favoured.
Previously, in the meeting of shareholders, Dang Khac Vy, Chair of Vietnam International Joint Stock Commercial Bank (VIB), said that the bank proposed to increase credit by 35 percent because VIB is one of the first banks in the market to meet the Basel II standards. However, VIB will comply with any limit allowed by the SBV. Even if the limit is lower, the bank’s plan will not be affected.
Military Joint Stock Commercial Bank (MB) set the target of credit growth this year at 20%. It is also the increase in outstanding loans to customers and bonds of economic organisations set by Tien Phong Joint Stock Commercial Bank (TPBank) for 2019 if approved by the SBV.
Targets set by some state-owned commercial banks are lower. Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) wants to increase by 15%, Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank) six to eight percent due to the pressure to raise the minimum capital adequacy ratio (CAR). Vietnam Bank for Agriculture and Rural Development (Agribank) plans to increase the loan balance to the economy by 11 percent to 14%, in which 60 percent would be agricultural and rural loans.
Joint stock banks set higher targets. Vietnam Technological and Commercial Joint Stock Bank (Techcombank) wants credit growth of 13 percent or higher, Nam A Joint Stock Commercial Bank (Nam A Bank) 18%, Kien Long Joint Stock Commercial Bank (Kien Long Bank) 15%. However, some banks set modest goals, such as Vietnam Thuong Tin Joint Stock Commercial Bank (Vietbank) with a growth rate target of 5.9 percent for this year.
The general rate presented by the SBV for credit growth this year is 14%, equivalent to the rate of 2018. Pham Thanh Ha, director of the Monetary Policy (SBV) said that credit growth would still be adjusted in accordance with actual situation and based on economic growth target of 6.8 percent and inflation of less than four percent.
14 percent credit growth is appropriate
Talking about the credit growth target of 14 percent this year, expert Nguyen Tri Hieu stated that this target is low in comparison to previous years but is consistent with reality.
‘Banks need to return to the concern of internal consolidation and capital structure to operate effectively and healthy. Therefore, the credit growth target of 14 percent is appropriate,’ shared Dr Nguyen Tri Hieu with the Nguoi Dong Hanh.
This year, the SBV will allocate a separate credit limit to each bank. According to Dr Nguyen Tri Hieu, the allocation will depend on the views of the SBV. Healthy banks with good networks and low bad debts are often assigned high targets. Meanwhile, for ineffective banks with large amount of bad debts, the target may be lower.
Banks that are granted low limits but set higher growth targets are required to adjust their operations. Therefore, banks must find solutions to increase credit more to increase profits.
Dr Nguyen Tri Hieu recommended four main solutions that can help banks achieve high credit growth and better profits.
First, they can re-lend to other banks and credit institutions in the interbank market. It will no longer be limited in terms of growth and will compensate for the restricted lending market.
Another solution is that they can adjust customer groups. Banks can exclude low-profit customers and pay more attention to high-profit ones. Similarly, higher interest sectors, such as consumer loans, should obtain more focus.
They can also reduce capital costs, operating costs such as marketing costs, and other costs to achieve better profit growth.
Finally, banks can boost service activities to increase revenues, compensating for credit growth restrictions.
