Credit growth in the first six months of 2020 was less than half of last year’s number, although banks had launched many support credit packages and low interest rates policies. According to the State Bank of Vietnam (SBV), credit growth until June 16 was only 2.13%, less than half of the same period last year (5.7%).
In a conference, Nguyen Quoc Hung, director of SBV Credit Department, said that slow credit growth was acceptable in the context of the current complicated disease situation. Although Vietnam had excellent control of the epidemic, the disease in foreign countries affected domestic businesses. Many businesses did not determine the purpose of the loan. Meanwhile, the banking industry confirmed that it would not lower its lending standards because of concerns about bad debts.
In individual banks, credit growth this year had a strong differentiation. Some banks up to May still recorded negative growth. Some had three-month credit growth reaching over four percent. However, many banks expected strong credit growth this year.
There were three banks submitting to shareholders for the plan of credit growth over 20 percent this year. Specifically, at the Annual general Meeting of Shareholders, Vietnam Maritime Joint Stock Commercial Bank (MSB) said that in 2020, the bank aimed to credit balance (including outstanding loans to economic organisations and individuals, to invest in corporate bonds) by 20 percent at 81.5 trillion dong. MSB also stated that it would carry out credit growth at the rate allowed by SBV under the operating policy from time to time. In the first three months of 2020, MSB’s customer loan balance increased by 3.3 percent to 65.691 trillion dong, corporate bond investment increased by about five percent.
Meanwhile, according to the documents of the Annual general Meeting of Shareholders, Nam A Commercial Joint Stock Bank (Nam A Bank) would submit to shareholders the business plan in 2020 with a credit balance increase of 21 percent to 82 trillion dong. If this growth were achieved, Nam A Bank’s consolidated pre-tax profit might reach 1 trillion dong. In fact, the above growth plan was reasonable, because the outstanding loans in the first three months of Nam A Bank increased by 4.6 percent to nearly dong 70.7 trillion dong.
Vietnam International Commercial Joint Stock Bank (VIB)’s shareholder meeting document also set a target of 24 percent of credit balance over 2019, reaching 16.408 trillion dong, including customer loans, corporate bonds, and debt purchases. Maximum credit growth must not exceed the limit allowed by SBV. Accordingly, VIB expected profit before tax to increase by 10 percent to 4.5 trillion dong. In Q1/2020, VIB’s customer loan balance increased significantly compared to the average of the whole industry (four percent to 129.2 trillion dong).
Many banks also set credit targets to increase by about 15 percent this year, including, Saigon Hanoi Commercial Joint Stock Bank (SHB), HCM City Development Joint Stock Commercial Bank (HDBank), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam Thuong Tin Commercial Joint Stock Bank (Vietbank). HDBank looked forward to a little higher achievement, with a credit target of 16%. Of course, all banks noted that they would grow within the SBV’s allowed range.
Groups that set a target of increasing 10 percent to 12 percent could be named Asia Commercial Joint Stock Bank (ACB) (11.75%), An Binh Commercial Joint Stock Bank (ABBank) (10.5%), Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) (10.7%), Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) (11%). Only a few banks set a credit growth target of less than 10 percent this year, such as Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Vietnam Export Import Commercial Joint Stock Bank (Eximbank). Explicitly, VietinBank stated that the credit target would increase by 4 percent to 8.5 percent this year, while the credit growth limit assigned by SBV was 8.5%. The credit growth of VietinBank would still depend on the bank’s charter capital increasing schedule.
Although setting the maximum target of 8.5%, VietinBank’s case was massive. The credit balance of VietinBank at the end of 2019 was over 922 trillion dong. And if the bank increased by 8.5 percent this year, it would inject about 78.4 trillion dong into the economy, equal to a 90 percent to 100 percent increase of small banks like Vietnam Maritime Joint Stock Commercial Bank (MSB) or Nam A Commercial Joint Stock Bank (Nam A Bank). However, VietinBank would need a great effort to achieve this goal. At the Annual general Meeting of Shareholders on May 23, Chair of VietinBank said that the credit to the time of the meeting was still lower than the beginning of the year (about two percent), because the total credit demand of the economy could not recover strongly. Therefore, the bank would have to accumulate growth in the second half of the year if it wanted to achieve its goals. This still depended on the borrowing demand as well as the health of businesses.
Not only VietinBank but the largest bank in the system, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), also recorded a one percent drop in outstanding loans in the first three months. Meanwhile, at the Annual general Meeting of Shareholders in early March, before the start of the social gap, BIDV had set a target of nine percent credit growth in 2020.
However, the above credit growth plans might need to be adjusted in the next time to suit the situation, as well as the supervision and guidance of SBV. Not to mention, banks still had to calculate how to grow when the risk of arising bad debt after the Covid epidemic was not to be underestimated.
SBV no longer placed a hard fixed number on credit growth this year. In press responses, the SBV’s leaders often said that they would flexibly and appropriately manage credit, base on the real situation and serve the ultimate goal of macroeconomic stability, and controlling inflation.
At present, credit growth was deficient due to the low demand for new loans. However, when the epidemic ended, the banking system was always ready to ensure the capital supply for businesses and people returning to normal activities, deputy Governor Nguyen Thi Hong responded to the press at the recent six-month review meeting. The deputy Governor also stated that SBV would continue to consider adjusting the credit growth limit of banks. This was in the process of review, analysis, and evaluation. Credit growth was necessary, but growth must accompany with risk control.
