Credit growth hard to accelerate at year’s end

Mr. Nguyen Tuan Anh, Director of the Department of Credit for Economic Sectors under the SBV, said that although credit growth was slow due to the impacts of the Covid-19 pandemic, the capital continued to focus on the fields of production and business and priority sectors. For instance, credit increased by 4.5 percent in the field of rural agriculture, 3.5 percent of that of small and medium-sized enterprises, and 5 percent of that of export.

Statistics of the State Bank of Vietnam also show that although credit growth in the first eight months of this year was lower than that in the same period last year, merely reaching 3.86 percent, banks in Ho Chi Minh City, together with the municipal Department of Industry and Trade, have actively launched connections to support enterprises to recover and develop production and business activities. The total capital in the connection activities exceeded VND87.8 trillion. Particularly, the connection activities between banks and enterprises in the districts have also provided loans worth nearly VND2.75 trillion. The credit package pledged by commercial banks at the beginning of this year has disbursed for over VND208 trillion. Generally, through these activities, nearly VND300 trillion worth of loans with low-interest rates have been introduced to the market to support enterprises.

From the second half of August up to now, the market has shown signs of recovery and revealed the bright spots of credit supply in the last months of this year of credit institutions. At the same time, banks also offer stimulus packages, such as exemption and reduction of lending interest rates to support enterprises affected by Covid-19. For example, HDBank has just had an interest-rate subsidy package for tenants and very-small enterprises to restore their business with a loan limit of up to VND2 billion and a grace period of up to 24 months for principals. This is considered as a good sign, signaling a new rebound from now to the end of the year.

Many commercial banks have increased their credit limits, such as Techcombank and VPBank raised credit room to 19-23 percent; MBB adjusted the credit room from 11.75 percent to 20 percent; VIB increased credit room to 12.5 percent compared to the initial limit; TPBank increased its credit room to 11.5 percent. However, four state-owned joint-stock commercial banks, consisting of Agribank, BIDV, Vietcombank, and Vietinbank did not ask to raise credit growth targets because they still faced difficulties in disbursement. After all, the room to increase loans for this group is still available. Meanwhile, credit growth still depends mainly on the group of the above four large banks.

Commercial banks said that the number of enterprises that want to restructure their debts and reduce the interest rates for existing loans is larger than that of enterprises that have the demand for new loans. SCB’s leaders said that the lending interest rates are now much less expensive than before, but enterprises in the sectors strongly affected by the pandemic do not need new loans but debt restructuring. Therefore, credit can only inject into industries capable of absorbing capital, such as consumption, necessities, pharmaceuticals, and retail.

Because it is hard to push credit into enterprises, recently, several commercial banks have boosted consumer lending with attractive interest rate packages. Specifically, from September this year, the personal loan interest rates for home loans, car loans, and house building and renovation at ABBANK was reduced for the fourth time with the lowest rate from only 5.9 percent per annum, effective until the end of December 31, 2020. SHB has also lowered the home loan interest rate from 7.5 percent per annum to 6.5 percent per annum, the loan interest rate for houses in housing projects, car loans, and consumer loans has dropped to only 6.8 percent annum. MSB continued to reduce interest rates to zero percent for individual customers with the needs for consumer loans and business development in the first month to the end of November this year.

According to Dr. Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council, commercial banks have chosen the solution of increasing consumer credit in the year-end period because lending encountered many difficulties in the past months. Meanwhile, during this period, increasing consumer credit will contribute to stimulating aggregate demand and supporting growth. However, according to this economist, the main driving force to promote credit growth at the year’s end is disease control and the recovery of socio-economic activities. Of these, small and medium-sized enterprises and individuals will have more demand for loans, and that is the room for credit to expand.

‘With the right solutions, credit in the last months of the year is likely to grow by 1 percent per month, for the growth of the whole year to reach from 8-9 percent,’ said Mr. Can Van Luc.

The SSI Research of the SSI Securities Company also said that even when the credit growth target is lowered to 10 percent in 2020, much lower than the target set at the beginning of the year at 13-14 percent and the growth rate of 13.65 percent in 2019, it is also extremely difficult to realize the target. Because, to achieve the target, credit growth in the last months of the year must be equivalent to that of the same period last year. This means that the average credit will have to increase by about 1.3 percent per month in the last months of the year, and this is unlikely to happen in the context of complicated pandemic developments all over the world and broken production chains.