Although many banks are at risk in the last months of this year if the credit threshold is not extended, many experts say businesses should not be too concerned about this.
Although only halfway through 2019, many banks have completed up to 70-80 percent of the year ‘s credit growth plan, especially some banks reached more than 90 percent.
Banks with the highest credit growth rate in the first half of this year are the banks that have been recognised to meet Basel II standards. In particular, Vietnam International Commercial Joint Stock Bank (VIB) is leading the way when credit growth in the first six months of 2019 is nearly 19 percent compared to the end of 2018, while the annual growth target is 35 percent.
Staying at the second position in terms of credit growth is probably Orient Commercial Joint Stock Bank (OCB) when customer loan balance reached 20 percent in the first half of this year, meeting the credit growth plan for the whole year.
The remaining banks also have to advance the credit growth limit of the last months of the year when they have implemented more than 50 percent of the year credit plan. For example, the credit of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) in the first six months of this year increased by 10.1 percent while the annual plan is 15 percent; Asia Commercial Joint Stock Bank (ACB) increased by 8.8 percent in the new credit limit of 17 percent; Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) was 8.9 percent on the plan of 16 percent; Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) is 8.4 percent while the plan is 15.57 percent.
Therefore, many banks are lining up to ask the State Bank of Vietnam (SBV) to limit credit growth but have not yet been approved.
However, there are also banks with relatively low credit growth. For example, Vietnam Export Import Commercial Joint Stock Bank (Eximbank), after the first six months of this year, credit of this bank only increased by 1.86 percent, completing 16.87 percent of the whole year credit plan. Even at Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), credit only rose by 2.38 percent, which has completed more than 34 percent of the year plan.
Last year, many banks had no credit growth in the last months of the year because they were not allowed to extend credit limit by SBV. This scenario is in danger of recurring this year.
Until now, no information has been released from SBV about whether to extend the general credit limit of 14 percent. Even banks that have been allowed to loose credit limit by SBV and have been recognised to meet Basel II standards, but the level is not much.
While the latest statistics of SBV showed, credit of the whole system increased by 7.33 percent in the first six months, approximately equal to the increase of the same period last year. It is also a reason for SBV to be cautious with the credit limit of banks, especially when inflation and exchange rate pressure have decreased, but still quite large.
An official of SBV said that the objective of controlling credit growth of 14 percent this year is to ensure financial stability for the banking system and the economy. Accordingly, credit growth must ensure safety and not generate bad debts. Banks that lend beyond the credit limit granted are violated, will not be allowed to extend the limit.
Agreeing with SBV’s point of view, a banking expert said that it was necessary to consider the threshold for credit extension for the following reasons: First, tightening credit growth was necessary and appropriate. with IMF recommendations when the credit balance of the economy increased to more than 130 percent of GDP. The second was market discipline. “Credit limit loosening will create a bad precedent in the market”, he advised.
Recognising that not being allowed to increase credit limit will affect the lending ability of many banks, but this expert said that businesses should not be too worried. Because credit growth in the first six months of this year increased by 7.33 percent, meaning that it reached more than 50 percent of the credit target for the whole year so the credit balance in the last months of the year was still very large. Moreover, banks had run out of credit room, but there were also some banks that only had a slight credit growth. In addition, banks that were not allowed to loosen room would also seek to quickly turn around their capital, actively recovered debts to have room for loans.
