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Finance & Banking

Last updated: Tuesday, November 20, 2018

 

Will Private Banking Sector Have High Credit Growth?

Posted: Tuesday, October 30, 2018


The State Bank of Vietnam (SBV) will not issue additional credit lines except for special cases, and therefore credit growth will depend heavily on the bank's capital.

In the latest report, Viet Dragon Securities (VDSC) expects that the credit growth of Vietnamese banks will maintain at an average of 16 per cent in 2018 (lower than 19 per cent in 2017) and 15 per cent in 2019, with retail loans growing faster than corporate loans.

VDSC believes that private commercial banks namely Asia Commercial Joint Stock Bank (ACB), Ho Chi Minh City Development Joint Stock Commercial Bank (HDB), Military Commercial Joint Stock Bank (MBB) will have higher credit growth than State-owned banks: Joint Stock Commercial Bank for Investment and Development of Vietnam (BID), Vietnam Bank for Industry and Trade (VTG), Bank for Foreign Trade of Vietnam (VCB). HDB will enjoy the fastest growth (18 per cent forecast in 2018) and CTG is the slowest (15 per cent).

According to Directive 04 by SBV Governor Le Minh Hung, the SBV said that it would not consider adjusting credit growth targets for banks in the second half of 2018, except for special circumstances such as participation in restructuring weak banks. This means that banks with high credit growth in the first half of 2018 will have to slow down in the second half of 2018.

According VDSC, affected banks included HDB (outstanding loans increased + 15 per cent compared with the beginning of the year, accounting for 81 per cent of the SBV limit), ACB (+ 12 per cent, 79 per cent), VCB (+ 12 per cent, 75 per cent) and MBB (+ 11 per cent, 71 per cent). At the same time, the banks that had slower growth in the first half of 2018, such as BID (+ 7 per cent, 46 per cent) and CTG (+ 8 per cent, 56 per cent), may be able to catch up growth of credit in the second half of the year.

In general, many banks are still confident of fulfilling their full year targets and retaining their original profit plan. In the first six months, profit growth of banks is more positive compared to the same period last year. The majority of banks have completed over 50 per cent of the profit target of the whole year. ACB, MBB and VCB have also achieved approximately 60 per cent of their pre-tax profit target.

The SBV has set a credit growth limit of 14-15 per cent for most banks in 2018, while the whole year target is 17 per cent for the whole system. Hence, additional quotas can still be provided in a number of "special cases", including banks involved in the restructuring of weak financial institutions.

Therefore, it is likely that banks, that are being tasked with supporting weak banks such as VCB (supporting VNCB), CTG (supporting OceanBank and GPBank) and HDB (awaiting merger with PGBank), will be considered. However, the VDSC also said that the current lack of capital of state-owned banks was a key factor in limiting the credit growth potential of these banks.

L.N








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