The State Bank of Vietnam (SBV) has said it would continue allocating credit growth limits for commercial bank this year to match the 14 per cent growth target set for the entire banking sector.
|Investors make transactions at Bao Viet Bank’s Tran Hung Dao branch in Ha Noi. – VNS Photo Truong Vi|
SBV Governor Le Minh Hung said the credit growth target set for this year was equivalent to the rate in 2018 so growth quotas would be assigned on the basis of assessing the operation and ability to develop credit healthily at each bank.
The SBV often sets credit growth limits for commercial banks, and most banks are expecting higher quotas this year as their profits depend significantly on lending services.
According to Le Duc Tho, chairman of VietinBank, his bank needs a higher credit growth quota this year to meet the demands of borrowers, especially for large national projects.
Last year, the SBV allowed VietinBank a credit growth limit of only 6.1 per cent, causing the bank’s pre-tax profit to drop to VND6.8 trillion (US$291.85 million) in 2018.
Banks that are restructuring also expect to have expanded credit growth limits in 2019.
Duong Cong Minh, chairman of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), asked the SBV for a credit growth limit of 18-20 per cent for his bank for 2018-20 period, the rate for which in 2019 would be 19 per cent.
Similarly, the HCM City Development Commercial Joint Stock Bank (HDBank) also expects to have a higher credit growth limit this year as it is in the process of completing a merger with Petrolimex Group Commercial Joint Stock Bank (PGBank).
Nguyen Xuan Thanh, director of the Public Policy Programme at the Fulbright School in HCM City, said the allocation of credit growth limits based on each bank’s health was appropriate as the pressure on credit growth in the banking industry was currently not significant.
Other experts also said the central bank should cautiously consider any expansion of credit growth limits for banks because it would carry risks, explaining if credit growth allocation was not strictly controlled, it would affect credit quality and cause bad debt to increase sharply.
Can Van Luc, chief economist at the Bank for Investment and Development of Vietnam, said banks shouldn’t expand lending unless they could manage the risks to ensure sustainable development.
In a recent report, Moody’s Investors Service also said moderation in Vietnamese banks’ credit growth was positive for their asset quality and capitalisation, explaining lower credit growth encouraged banks to focus on better quality borrowers, which would improve asset quality in the long term.
Experts forecast the central bank would continue control credit growth at around 14 per cent per year in the next three to five years, lower than the average rate of 18.1 per cent in the 2015-17 period.
SBV data showed Vietnamese banks’ total credit grew 14 per cent in 2018, the lowest growth rate since 2014. The slower growth was primarily due to the central bank’s tightening of credit growth limits.
- Online breast milk sharing carries health risks from bacterial contamination: study
- EDA, TD Bank offer new small business loan
- Majority of New Yorkers qualify for financial aid in state marketplace health plans
- Apple Pay, Apple Watch enable wallet-free lifestyle but security experts have concerns over health data
- Moody’s cuts credit ratings on 15 major banks
- The Daily Checkup: Reducing lung cancer depends on cutting smoking and exposure to it
- Q&A: FICO credit score changes could help you
- Tips on avoiding extra fees for debit card use by big banks like Bank of America, Citibank
- Banks give customers access to free credit scores
- Germy credit cards like a 'dirty toilet bowl': study