Credit growth of credit institutions was quite positive at 5.04% at the end of the first quarter of this year, much higher than the 2.16% rise in the same period last year, the State Bank of Vietnam (SBV)’s Deputy Governor Dao Minh Tu said at the Government’s regular press conference.

Vietnam will soon disburse at least 50% of the VND350 trillion (US$15.42 billion) economic recovery package, the largest in its history, aiming to reboot the country’s economy after a long period of social and mobility restrictions due to the COVID-19 pandemic.

The State Bank of Vietnam (SBV) has to continually inject money to support the liquidity of the banking system as the capital demand and interest rates on the interbank market have remained high though the Tet (Lunar New Year) holiday ended.

A majority of credit institutions are optimistic about their business performance in 2022, according to the latest survey by the State Bank of Vietnam (SBV).

The State Bank of Vietnam (SBV)’s expansion of credit growth quotas for commercial banks has created favourable conditions for lenders to boost lending as a way of supporting capital sources for individuals and firms to recover after the COVID-19 pandemic.

Many banks have increased their interest rates to attract more depositors after getting a credit growth quota expansion from the State Bank of Vietnam (SBV).

Standard Chartered has forecast a potential interest rate cut if the economic impact of Vietnam’s COVID-19 outbreak lasts beyond October.

Profits of the banking industry in the third quarter of 2021 would decrease by 19% compared to the previous quarter due to slowing credit growth and increasing provision expenses, Yuanta Securities Vietnam estimated.

Banks have been promoting the mobilisation of medium- and long-term capital through bond issuance to meet the State Bank of Vietnam (SBV)’s requirements on capital adequacy ratio (CAR).

An escalation in COVID-19 cases and deaths in July-August will undermine Vietnam’s previously strong recovery from the pandemic shock and may temporarily set back the positive rating momentum, said Fitch Ratings.