Opportunities from Loosening Credit Packages

In early 2014, many banks, and the whole banking system had negative credit growth. It may not constitute a rule, but the case of 2014 is expected not to happen in 2015.

 

The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) is one of many banks with a significantly increasing credit in 2014 and in the two first months of 2015, the bank has a credit growth of 5 percent. According to Nghiem Xuan Thanh, Chairman of Vietcombank, the credit growth has reached one third of the year. In 2015, the credit growth of Vietcombank is projected to be about 18 percent.

 

Like Vietcombank, the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) has a vivid credit growth in February. According to General Director of Vietinbank Le Duc Tho, in the first 2 weeks of February, the lending overlook is good but this phenomenon is only seasonal. The credit growth is likely to reach 1.7 percent and overcome negative rate. And this also reflects an economic picture that is different from the first months of the past year; many businesses have made loans at the beginning of the year; the banks are not afraid of lending to avoid the capital accumulation.

 

Of course, not all banks and businesses can take advantage of the opportunities to "loosen" the currency. At present, the loosening of reins on credit from 12-14 percent to 15-17 percent is not an only opportunity for the whole system. Many banks have set more modest plans than that the Vietnam State Bank set. For example, the Vietinbank only set the targeted credit growth at 13-15 percent. According to smaller banks like state-owned commercial banks, they are planning to develop short-term loans for consumption purposes and better medium and long term loans in terms of quantity. According to Director of Retail Banking at Vietnam International Bank (VIB) Rahn Wood, currently, the VIB has none of pressures on bank credit growth because they has set the plan for the whole year and for each month as well as calculated seasonal factors. Therefore, if the credit growth is not strong enough, the bank will use more time and resources to invest in key projects to increase credit growth.

 

"There are signs that 2015 is off to a pretty good start. We're ready for the loans from the beginning of the year through a centralized approval system for businesses that customers can borrow more quickly and effectively. If interest rates continue to be lower, there will be an increasing demands for loans. In the long term, the medium and long- term credit rates are really attractive. In the future, the Vietnamese economy will prosper and the CPI is forecast to increase and the interest rates will be adjusted. This is a good condition the banks will give more lending," said Rahn Wood.

 

According to Tran Du Lich, a renowned economist, with positive signs of 2014 and 2015, the banking system is able to achieve credit growth as targeted. However, according to Mr Lich, the interest rate for long-term loans should be reduced to increase the number of new businesses who make loans for manufacturing. This will help the credit grow sustainably.

 

At the meeting of a large bank, SBV Governor Nguyen Van Binh called banks to sacrifice their profits and to rebalance the assets to reduce the medium and long- term interest rates to 1-1.5 percent per year in 2015. And this objective has been stated in Directive 1 of the State Bank on monetary policy operating activities in 2015 approved by the Governor.