Interest rates are projected to rise by some 0.25-0.5 percentage points in 2019 (Source: VNA)Hanoi (VNS/VNA) - Credit growth in the next three to five years isforecast to be around 14 percent per year, lower than the average rate of 18.1percent in the 2015-17 period.
As part of a recent report on the prospects of the country’s banking industryin 2019, the Bao Viet Securities Co (BVSC) projected that the lower creditgrowth was due to a decline in both capital supply and demand.
Specifically, on the capital demand, the country’s economic growth next year isprojected to slow to 6.4-6.5 percent, which will have a domino effect oncapital demand as local firms will not need as much capital as previously toexpand production and business.
In addition, forecasted interest rates hike of some 0.25-0.5 percentage pointsin 2019 will also cause a decline in loans from borrowers, BVSC analysts said.
The credit supply next year will be also restricted due to the central bank’snew regulations on increasing the risk weighting of real estate loans in the bankingsystem from the current 200 percent to 250 percent from early next year. Therule means that for every new real estate loan extended, risk weighted assetsincrease by two and a half times the amount of the loan. This significantlydisincentivises banks from providing new loans to the real estate market andhelps take some of the heat out of the sector.
A central bank regulationon reducing the proportion of short-term funds to medium and long-term loans atbanks from the current 45 percent to 40 percent from the beginning of 2019 willalso reduce banks’ capital supply.
BVSC analysts also estimated that due to the application of Basel II in thecountry’s banking system from 2020 as per the central bank’s plan, theestimated capital needed to meet credit growth of 14-15 percent per year atlisted banks will be about 237 trillion VND (10.13 billion USD). The largestcapital needs are anticipated at Vietinbank, LienVietPostBank and Sacombank,with annual average capital growth rates of 22 percent, 16 percent and 13 percentper year, respectively.-VNS/VNA
VNA
