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Banks can hit 25% loan growth target: Experts
Though credit growth has been tepid in recent months, there is widespread optimism that the year's target of 25 per cent will be hit.
By July end, it stood at 12.9 per cent. Analysts say while the growth has not been as high as expected, it is acceptable considering the current economic situation and after interest rates rose sharply in the wake of the Government's subsidised credit programme.
To realise the objective of sustaining 6.5 per cent GDP growth rate and containing inflation at a low level, the Government has adopted several flexible monetary policies, including tightening money supply.
The global economy's slow recovery has also affected exports.
Pham Quoc Thanh, Deputy General Director of the An Binh Commercial Joint Stock Bank, says investment has yet to pick up after the recession and so enterprises and individuals are not borrowing much yet.
Nevertheless, analysts believe 25 per cent growth in credit is achievable since the annual economic and business cycles usually peak in the second half of the year.
Duong Thu Huong, General Secretary of the Viet Nam Banking Association, believes since demand for dong loans from businesses will increase sharply in the fourth quarter, the target is within reach.
Credit growth depends on the economy's capacity to utilise capital, according to Tran Du Lich, member of the National Financial and Monetary Policy Consulting Council.
But he also points out that businesses did not borrow much in the last few months since they were sitting on large stockpiles of goods.
With the Government assisting them in selling their goods, they will soon be eyeing increased production again and begin to borrow, he says, meaning the credit growth target can be hit.
But not all are so sanguine about achieving the target.
Many bankers fear credit growth will not accelerate in the remaining months due to restrictive regulations, small banks' limited availability of funds for lending and major banks' difficulties in finding good borrowers.
Pham Trung Cang, Vice Chairman of the Asia Commercial Joint Stock Bank, says his bank's outstanding loans grew by just 30 per cent in the first eight months against a 54 per cent growth target for the whole year. With just four months left, the bank will not hit the target, he says.
Many clients do not want to borrow now not only because of the high lending rates but also because they cannot find markets for their products since the global economy has not recovered yet.
Small banks have another reason for being unable to increase lending.
Trinh Van Tuan, CEO of the Orient Commercial Bank (OCB), says his bank's loan-deposit ratio has reached 90 per cent, well above the 80 per cent ceiling set to be mandated by a circular taking effect on October 1.
This means small banks like OCB cannot increase lending if they do not mobilise more deposits, he says.
Market in meltdown
It is a paradox that while the country's macro economy is rather stable, the stock market has taken a nosedive.
The benchmark VN-index stood at 423.89 points on August 25, never coming within even touching distance of the 500-point mark during the whole of last month.
Analysts blame this mainly on the low liquidity in the market.
Figures from the HCM City Stock Exchange show that trading value has been on a continuous slide in recent months, falling from VND45 trillion in March to VND40 trillion in April and VND38 trillion, VND30 trillion, and VND25 trillion in the next three months. In August it was VND23 trillion.
Foreign investors too did less and less business in that period. Between June and August their trading was worth just VND2 trillion - 3 trillion a month compared to VND5 trillion - VND6 trillion in previous months.
The money flowing into the stock market has been drying up mostly because of the Government's new monetary policies.
Its Circular 13, which will take effect on October 1, requires banks to increase their capital adequacy ratio by 1 percentage point to 9 per cent and also imposes restrictions on Tier I, or the highest quality, capital.
Banks cannot lend more than 80 per cent of their total deposits and have to set aside 250 per cent as risk provision for all loans secured by property investors.
Such drastic changes have prevented large volumes of bank funds from flowing into the securities markets.
Besides, investors are wary of the relentlessly falling market and prefer to sit on cash.
There have been reports of some securities companies and individuals spreading misinformation for their own benefit, making investors even more wary.
As a result, investors seem to have no intention of returning to the market any time soon and prefer to deposit their money in banks or invest in gold or other asset classes.
The panic has caused selling pressure to skyrocket, with the volume of stocks being traded at the market raising to double the figure of late last year.
Even some securities companies are in the race to sell out and they are putting their stocks on offer at any price hoping to get out of the market.
Dong depreciation
On August 18 the State Bank of Viet Nam unexpectedly depreciated the dong by 2 per cent despite the country's relatively stable foreign exchange market.
The surprising move has caused concerns about a possible shortage of hard currency at the end of the year when corporate foreign currency loans will fall due.
But this possible pre-emptive action will give the central bank more time and resources to work on the foreign currency loans issue and keep inflation to single digits this year, according to analysts at fund management company Viet Nam Asset Management Ltd.
Inflation was 0.23 per cent in August and 5.08 per cent for the first eight months, making the full year target of 8 per cent realistic.
The depreciation has also helped boost exports, reducing the trade deficit. The year-to-date trade deficit of 17.9 per cent of exports remains below the Government's target. Industrial production in August was up 13.7 per cent year on year against the target of 12 per cent.
Thien Ly
vietnamnews
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