Maximum credit growth forecast at 18-19% in 2017

The Government in August decided to extend this year’s credit growth target to 21% from 18% planned previously to support economic growth. 

According to Bao Viet Securities Company (BVSC), credit growth will not reach 21% for several reasons.

First, it is likely that firms’ ability to absorb capital is limited and the capital demand of the economy is likely to be only 15-18% per year, which is a moderate level without causing too much risk of potential bad debt.

Second, some banks such as VIB, ACB, HDBank and Military Bank want to strengthen their lending. However, in the first two quarters of the year itself, their lending quota was almost used up.

Third, banks such as Vietcombank, BIDV and Vietinbank that have the largest capital scale in the banking system are facing difficulties in raising capital to meet the State Bank of Vietnam’s (SBV) Basel II regulations. The Capital Adequacy Ratio of banks is also approaching the regulated 9% threshold. Therefore, it will be difficult for the banks to expand lending if they fail to increase capital in the near future.

As a result, BVSC forecasts that credit growth for this entire year is likely to reach 18-19%, the level equal to 2016.

Previously, SBV Governor Le Minh Hung said the central bank is under no pressure to relax the monetary policy to help the country achieve the economic growth target of 6.7% this year. The central bank had asked credit institutions to control credit growth and ensure credit quality.

"This year, the quality of loans has been strengthened and tightly controlled in the risky industries, especially real estate. The Government and the SBV are consistent with the opinion that economic growth must ensure the goal of macro-economic stability," Hung said.

Reports of the National Financial Supervisory Commission showed that lending of the banking system had accelerated significantly last month. Specifically, credit growth in November rose 2.8% against the previous month, pushing the total rise in this year’s first 11 months to 15.3%.

According to the Government’s financial watchdog, the ratio of medium- and long-term loans in the 11 months increased by 12.7% against December last year and accounted for 53.8% of total outstanding loans.

The rising rate of short-term loans was 18.6%, compared with 15.2% in the first 11 months of 2016.

The commission also noted that lending in foreign currency expanded 12.3% from the end of 2016, more than doubling the expansion of 5.8% in the same period last year.

Meanwhile, loans in Vietnamese dong increased 15.6% in the 11-month period, lower than the 16.6% increase in the same period last year, and accounted for 91.8% of total credit.

The commission highlighted that consumer lending continued at a rapid pace, with growth hitting 59% in the 11-month period, driven mainly by home loans.