Customers at an OCB transaction office in Hanoi. (Photo: OCB)

According to the current legal regulations, the central bank assigns an annualcredit growth quota for each bank depending on its health at the beginning ofthe year to match the 14 percent growth target set for the entire bankingsector.

At Tien Phong Bank (TPBank), the SBV had set the bank’s quota at 13 percent forthe whole of 2019, but in the first quarter of the year it had already reachedsome 11 percent growth.

The Orient Commercial Bank (OCB) also posted a credit growth rate of 8.7 percentin the first quarter of the year, putting it among banks with the highestcredit growth in Q1 2019.

The same trend was also seen at the Vietnam Prosperity Bank, which ended thefirst quarter with credit growth reaching 6.8 percent, double the bank’s ratein the same period of last year and triple the 2.28 percent average rising rateof the entire banking system.

The lending was also high at the Vietnam International Bank (VIB), with a riseof 5.9 percent to 100.87 trillion VND (4.33 billion USD) in the first quarterof 2019.

Sacombank also said by the end of the first quarter, the bank has almost used upthe assigned quota for the whole year. The bank’s credit growth in the firstquarter rose by 5.61 percent to 271.02 trillion VND in Q1 while its creditgrowth quota was only 7 percent in 2019, according to the bank’s chairman DuongCong Minh.

This year, banks said that their assigned average credit growth ratios wereranging from 12 percent to 14 percent, such as Bank for Investment andDevelopment (BIDV) at 12 percent, Military Bank at 14 percent, Asia CommercialBank and Saigon-Hanoi Commercial Bank at 13 percent. However, the rise at somebanks was lower, such as VietinBank at only 7 percent.

With credit contributing a large part to banks’ revenue, some banks expect thecentral bank would expand the credit growth limit as they have so far met BaselII standards ahead of the 2020 deadline.

However, forecasting on the banks’ ability to get an approval from the centralbank for a credit expansion from now until the end of the year, finance andbanking expert Can Van Luc said that only banks that operate well, have lownon-performing loans, high profits, have a wide network and abundant financialresources might have the opportunity to get to the expansion.

The central bank has so far also said it would pursue a credit growth target of14 percent for the entire banking system this year to stabilise the macroeconomy and meet other goals of the Government.

Though the 2019 credit target is much lower than the 18 percent average rate ofthe previous years, international experts have also agreed with the centralbank’s move.

“We would view a moderation in loan growth, if sustained, positively,especially in the context that system leverage – as indicated by total bankcredit/GDP of 134 percent at the end of 2018 – is already very high, andsignificantly higher than the medium for ‘BB’ rated jurisdictions (around 60 percent),”Jonathan Cornish, Head of Asia-Pacific Financial Institutions at Fitch Ratings,told Viet Nam News.

“It is not unusual among emerging markets for system credit growth to taper offafter years of rapid expansion, and it could be positive for the system if theeconomy can continue to grow at a relatively high pace while reducing itsreliance on credit – especially from the banking sector – to support thatgrowth,” Cornish said. – VNS/VNA