Most Vietnamese banks maintain reasonable credit growth in face of credit quota

Ngoc Thuy 12:24, 2018/09/08

As Vietnamese banks were given credit quota since the beginning of the year, only Tien Phong Bank (TPBank) and Ho Chi Minh Development Bank (HDBank) have filled up their credit quota.

Many banks maintained reasonable credit growth as of June, which is in line with their guidance and granted limits, stated a recent report by Viet Dragon Securities Company (VDSC).

Meanwhile, others have pushed lending, with credit growth exceeding 10%, even reaching their lending cap. The remaining credit growth allowance for those in the second half of the year is very limited.

Banks with highest credit growth rates in the January - June period are TPBank with 15%, HDBank (14.5%), which already reached their quota (both at 15%), followed by LienVietPost Bank (13.3%) and Orient Commercial Bank, or OCB, (12.2%). These four banks have set very high credit growth targets for the entire year, at 20%, even 40% as in HDBank's case, which are much higher than initial quota given by the State Bank of Vietnam (SBV). This means that since the beginning, they had expected to seek approval for additional credit limit in the third quarter. Their effort to push strong credit growth in the first six months is understandable, stated VDSC.

Banks with credit growth of more than 10%, which are Asia Commercial Bank (ACB) with 11.8%, Bank for Foreign Trade of Vietnam (Vietcombank) 11.3%, and Military Bank 10.7%. All of these banks set credit growth target at 15%, equal to the level permitted by SBV. Therefore, when the SBV's new instructions are released, these banks quickly came up with coping strategies to allocate growth in the last two quarters. According to the brokerage's report, these banks will focus on credit quality rather than volume by restructuring loans and prioritizing segments with higher profit margin, to slow down credit growth.

In early August, the SBV released Instruction No. 4, affirming that the agency will not consider adjusting credit growth limits in the second half of 2018 (except for special cases). As such, banks that have used up almost of their permitted level will have to find some ways to allocate remaining quota in the last quarters properly. This might be challenging as borrowing needs usually surge in the fourth quarter.

LienVietPost Bank has reduced its 2018 profit before tax (PBT) guidance by 33%, from VND1.8 trillion (US$76.9 million) to VND1.2 trillion (US$51.26 million), due to the absence of additional quota. It is notable that LienVietPost Bank is the only bank that has to adjust its PBT guidance, as the bank only fulfilled 37% of its target after the first six months.

Some exceptional cases are HDBank, who is waiting for the SBV's approval for the merger with Petrolimex Group Bank (PG Bank), while Vietcombank and Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) are participating in the restructuring of weak financial institutions in 2018.

The second group includes banks with moderate credit growth, which are Vietnam International Commercial Joint Stock Bank (VIB Bank) with 8.9%, Vietnam Prosperity Bank (VPBank) (7.8%), Vietinbank (7.6%), and Bank for Investment and Development of Vietnam or BIDV (6.9%).

There is sufficient room left, so these banks can actively manage credit growth in the next quarters without being too concerned about the peak season in the fourth quarter. According to BIDV's representative, this bank tentatively grew credit moderately in the first half to spare more room for the second half. "We hold the view that the effect of the SBV's new instruction on these banks will be minor," VDSC said.

The last case is Vietnam Technological and Commercial Bank (Techcombank) with very low credit growth of 2.3% in the first six months of 2018, amongst which customer lending growth was 3.6%. This rate is lower than that of the entire banking industry and significantly lower than Techcombank's initial target of 18%. However, Techcombank's direction is to reduce the dependence on credit growth. As a result, the instruction of not granting additional limit will hardly impact Techcombank's final credit growth.

The brokerage stated that the banks' efforts to refrain their lending might create adverse effects if too many banks are shifting towards the high profit retail segments. This will in turn intensifies competition in these segments and squeeze the opportunities for net interest margin (NIM) improvement.

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