The credit growth of the whole banking sector by the end of September 2019 increased by 9.4 percent compared to the end of 2018. The credit balance at many banks increased to the limit rate since the beginning of the year, but banks still boosted capital to the market.
Credit increased rapidly at the end of the year
According to the report submitted to the National Assembly by the State Bank of Vietnam (SBV)’s Governor Le Minh Hung, SBV aimed for a credit growth target of 14 percent in 2019, with flexible adjustments to suit the real happenings to control inflation, maintain stable macro-economy and support consistent growth. As of September 30, 2019, the credit increased by 9.4 percent compared to the end of 2018.
Previously, information released from SBV showed that, on September 24, the credit balance of the whole banking industry increased by 8.64 percent. Thus, as of the end of the year, credit balance tended to rise, as Q4/2019 would be the peak business season of businesses client.
The financial statement of the three first quarters in 2019 of many banks showed that balance had increased to the limit allocated from the beginning of 2019. In particular, Orient Commercial Joint Stock Bank (OCB) had credit growth up to 20 percent over the first half of 2019 and was submitting to SBV for further relaxation, since the completed application of Basel II standards in 2017.
Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank)’s loan growth by the end of September 2019 reached 290.934 trillion dong, 13.1 percent higher. In 2019, Sacombank had been granted a credit growth limit of seven percent and reached the border by July 2019, when loan balance reached 280.555 trillion dong. Duong Cong Minh, Chair of the Board of directors of Sacombank, proposed that SBV raised the loan limit from 18 percent to 20 percent for the period from 2018 to 2020. In 2019, Sacombank expected the threshold to be granted at 19 percent after SBV had approved for the Bank to support people’s credit funds.
In fact, by the end of June 2019, many banks ran out of the lending capacity when the lending threshold was exhausted. Thus, banks had to try to recover bad debts, and only short-term loans were able to re-lend. Specifically, the credit growth of Tien Phong Commercial Joint Stock Bank (TPBank) by the end of June 2019 reached 11.2 percent, while the target assigned by SBV earlier this year was 13 percent. TPBank was the fifth bank that complied with Circular 41/2016/TT-NHNN, so it was loosened the loan limit by SBV though at a quite small level, which was 17 percent for the whole year.
Meanwhile, OCB, Vietnam International Commercial Joint Stock Bank (VIB) set the target of credit growth for the whole year at 30 percent and 35 percent, but not yet approved by SBV. Nguyen Dinh Tung, Chief Executive Officer (CEO) of OCB, said that the Bank reached the lending threshold granted by SBV at the beginning of the year, and by the end of Q2/2019, the bank’s loan balance reached a growth rate of 20 percent. OCB was trying to recover bad debt and short-term loans.
Quick capital turnover
Until then, SBV had just approved to increase the credit growth limit of 2019 for Asia Commercial Joint Stock Bank (ACB) from 13 percent to 17 percent, whose’s loan balance increased by nine percent according to the semi-annual financial statement of 2019; for Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) from 12 percent to 16 percent; for Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) from 13 percent to 17 percent; for Military Commercial Joint Stock Bank (MB) from 13 percent to 17 percent, and for TPBank from 13 percent to 17 percent. Besides, other banks that applied Basel II like Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), VIB, OCB, Vietnam Maritime JointStock Commercial Bank (MSB) received no information of loosening the lending threshold.
To extend the threshold for capital trading in the peak season at the end of 2019, banks must manage and promote small and odd loans to quickly turnover capital. Nguyen Dinh Tung, CEO of OCB, said that although reaching the threshold, OCB continued to encourage lending by providing capital for retail customers. When making a retail loan, customers would continue to liquidate, and the bank could lend to new customers.
By the end of the first nine months of this year, Vietcombank’s credit growth was 11.6 percent, reaching over 735 trillion dong. As a result, Vietcombank had increased credit by more than two-third of the limit licensed by SBV at the beginning of the year. However, Vietcombank leaders once said that the bank would not ask for exceeding the ceiling to expand retail.
According to a recent SBV survey, credit institutions had reduced their expectations of credit and deposit growth shortly. Specifically, capital mobilisation of the whole system was expected to increase by an average of 4.39 percent in Q4/2019 and increase by 13.06 percent in 2019, declining by 0.42 percent compared to the anticipated level of the previous survey (but still higher than the actual increase of 12.45 percent in 2018).
Along with that, the credit balance of the banking system was expected to grow 4.85 percent in Q4/2019 and increase by 13.61 percent in 2019, was adjusted to decrease by 0.72 percent compared to the average expected number of 14.33 percent recorded in the previous survey (lower than the actual increase of 13.88 percent in 2018). Credit institutions also continuously revised to lower the expectation on the growth of loan balance in 2019 from 15.27 percent to 13.61 percent during surveys (September 2019), close to the aim of credit growth for the whole banking industry in 2019.
