More Optimistic about Businesses’ Loan Absorption

 

Rate cut and credit growth policies of the Government and the central bank are effectively boosting borrowing demands of organisations and individuals in the country. According to credit institutions, the demand for using banking products and services is deemed ‘ordinary’ by 59.5 percent of credit institutions, ‘high’ by 35.1 percent of respondents and ‘low’ by 5.4 percent of banks surveyed.

 

The banking sector is believed to outperform in the third quarter of 2015 by 63 percent of credit institutions surveyed while a third anticipated a stable outlook and only 3.5 percent feared a decline. Currently, 41.2 percent of credit institutions said their business situations are ‘good’ (higher than the previous period); 53 percent said they led ‘normal’ business, and 5.8 percent reported ‘poor’ performances. These good results are expected to be extended to the third quarter of 2015 and in 2015 as a whole. Up to 86 percent of credit institutions hoped overall business results in 2015 will be better than those in 2014 while 41 percent hoped for much-improved outcomes. Pre-tax profit growth of the entire system is projected to rise 8.9 percent in 2015.

 

Most credit institutions forecast that risks of customer groups will be stable or decrease in 2015 and non-performing loan (NPL) ratio will be stable or drop in the third quarter of 2015. Bad debt may be lower than that in the end of 2014. The bad debt ratio is hoped to reach 2.49 percent at the end of 2015, lower than the initial target of 3 percent that the SBV set in Directive 01/CT-NHNN.

 

According to survey results, most credit institutions anticipated a slight decline and stability in deposit and lending interest rates in the third quarter of 2015. Some 51-61 percent of credit institutions believed that interest rates at the end of 2015 will be lower than those at the end of 2014. Lending interest rates are expected to fall more than deposit rates. Lending interest rates are predicted to fall 0.13 percent per annum in the third quarter. In 2015, deposit interest rates are hoped to go down by 0.2 percent while lending rates are expected to decrease by 0.44 percent.

 

The Vietnamese dong and dollar liquidity at most banks is in ‘good’ status. Up to 99 percent of credit institutions expected outstanding credit to rise 6.8 percent in the third quarter of 2015 and 18.2 percent in 2015, higher than the growth of 14.2 percent in 2014 and than the target growth of 13-15 percent set by the central bank.

 

Notably, deposits are forecast to increase 15.8 percent increase this year, higher than the estimation of 14.9 percent in the previous survey. Depositors tend to prefer maturity terms of six months or longer. Specifically, 89-93 percent of credit institutions believed in an increase in deposits of 6-12-month terms in 2015 while 89 percent of surveyed envisaged a growth in deposits of less than six months. 92 percent of respondents expected a rise in deposits of one year or more.