Illustrative image (Source: cafef.vn)Hanoi (VNA) - Credit growth in the first two months of 2017 rose 1.23percent year-on-year, but credit institutions remain cautious over businesstargets while focusing on lending quality.
The growth seen in 2017 was higher than the 0.33 per cent growth rate noted inthe first two months of 2016, according to a report from the Ministry ofPlanning and Investment.
Industry insiders said the rise in the first months of the year would helpcredit growth spread more evenly across each quarter instead of only making animpact in the last quarter, as in previous years.
According to expert Nguyen Tri Hieu, based on the current condition of theglobal economy, optimistic forecasts of the country’s credit growth for thisyear can still be maintained.
However, he added, the rise for two months alone cannot say much, as therecould be many fluctuations, especially in imports and exports, in the remainingmonths of the year. "If the world economy experiences a strong shake-up,this will surely affect Vietnam," he said.
Credit institutions also appear cautious with their business goals as they haveset lower credit growth targets this year than last year. Vietcombank, forexample, has set a credit growth target of roughly 18 percent this year, lowerthan the 18.9 percent rise seen last year.
In discussing the caution being exercised by credit institutions, experts havesaid there are both domestic and international causes behind it.
According to experts, the global economy in 2017 is forecast to be challengingand will have an impact on Vietnam’s economy, which is wide open and dependenton exports.
Now, even the US government is moving towards trade protectionism, bringing USmanufacturers back to the US market. The US’s economic relations with othernations are also under review. This will partly reduce foreign investment inVietnam, as investors tend to return to traditional markets when the globaleconomy slows down.
Banks seem to have acknowledged this risk too, so they are being more cautiouswith their business goals, the experts forecast.
In the domestic market, the State Bank of Vietnam (SBV) has claimed it willcontinue to apply tight controls over lending in potentially risky areas, suchas lending to large clients, real estate, and BOT and BT projects in thetransport sector.
Under SBV’s Circular 06/2016/TT-NHNN on asset-liability management and realestate loans, commercial banks have been allowed to use a maximum ratio of 50percent short-term funding for loans with terms extending beyond 12 monthssince the end of 2016, down from the previous 60 percent. This ratio will bereduced to 40 percent by the end of 2017.
Circular 06 also raised the risk weights for real estate loans to 200 percentfrom the end of 2016, from the previous 150 percent.
The rising risk weight means if commercial banks want to expand their realestate loans segment, they must increase their capital to have a capitaladequacy ratio of at least 9 percent. If they fail to increase their capital,the banks must limit their scale of lending. Meanwhile, it remains difficult toraise capital at this time.
Besides, many commercial banks have also prioritised the quality of lendinginstead of only focusing on credit growth as previously.
Pham Hong Hai, General Director of HSBC Vietnam, told Thoi bao ngan hang (BankingTimes) that credit flows should focus on key areas of the economy, based on theeffective measurement of capital flow. Hai also agreed with thecentral bank’s decision to tightly control the amount of capital pouring intopotentially risky areas, such as real estate and securities.
According to Hai, if credit growth is too high, banks will face manydifficulties in maintaining and ensuring the security of their capital infuture.
Nghiem Xuan Thanh, Chairman of Vietcombank, which was the first bank tosuccessfully recover all bad debts sold to the Vietnam Asset Management Companyand currently has a bad debt ratio of less than 1.5 percent, said his bankplanned to actively promote lending to the government’s five priority areasthis year.
Outstanding loans to these areas amounted to 170 trillion VND (7.49 billion USD),accounting for 35 percent of the bank’s total outstanding loans. The priorityareas include agriculture and rural development, production for export, smalland medium enterprises, support industry and hi-tech application.
Expert Hieu said the most important task for banks in using theircapital effectively is to manage risk, adding that banks should only provideloans to well-scrutinised applicants. The governance of banks must also bechanged to fit reality.
In addition, operating costs must be considered, the expert said.-VNA
VNA
