Bank lending expected to get out of coronavirus doldrums soon

Experts have forecast bank credit growth in the second quarter to reach 3 5 4 percent much higher than the rate in the first quarter
bank lending expected to get out of coronavirus doldrums soon

Credit growth is expected to improve significantly thanks to many proactive measures taken by the Government and central bank recently to revive the economy. (Photo cafef.vn)

In the first three months, the rates had been 0.1%, 0.07% and 1.1% as the COVID-19 pandemic severely impacted various industries and their demand for funds.

Consumer demand and foreign trade were also badly hit.

The State Bank of Vietnam (SBV) said in the first quarter many businesses increased repayment of existing debts while not borrowing afresh.

Experts say the situation has been improving in the second quarter with demand from credit from businesses and inpiduals showing signs of increasing.

In Hanoi, total loans outstanding at credit institutions in May were estimated at VND2.163 trillion (US$94 million), representing a 2.4% increase for the year.

Credit growth is expected to improve significantly thanks to many proactive measures taken by the Government and central bank recently to revive the economy.

For instance, the SBV has cut benchmark interest rates, the latest occasion being on May 12 when the refinancing rate was reduced to 4.5% from 5%, the discount rate to 3% from 3.5% and the overnight inter-bank lending rate to 5.5%, from 6%.

Fitch Solutions experts forecast a further 50 basis point cut that would take the refinancing rate down to 4% and discount rate to 2.5% by the end of this year.

The cuts are likely to have a strong impact on the economy by encouraging banks to reduce their lending interest rates and boost demand for credit, experts say.

Besides, low deposit interest rates, especially for the short term, has helped and will help banks reduce their cost of funds further, giving a further fillip to lending interest rate cuts.

The Government recently gave a five-month extension for payment of taxes and land use fees for businesses hit by the pandemic, which come to an estimated VND180 trillion, benefiting 98% of firms in the country.

All these measures are expected to help increase the credit demand.

The Government’s policy of identifying public investment as the engine for economic growth, which has stalled due to the pandemic, has placed the focus on speeding up disbursement of public investment.

While other investment sources have slowed down, increasing public investment, planned at nearly VND700 trillion this year, should be useful in accelerating post-pandemic economic growth, thus creating more employment and increasing credit demand.

Though credit growth is expected to be only 9-10% this year compared to 13% last year, paradoxically some banks have nearly reached their full-year credit quota and are asking the central bank for more credit quotas as they have nearly reached the threshold.

VPB for instance has crossed 12% while it has a full-year quota of 13%.

Its CEO said the bank had turned its lending focus to customers less affected by the pandemic since the beginning of this year.

TPBank announced at its annual general meeting recently that its credit growth by the end of April was 11%, meaning it had only 0.5% left.

It is expected to ask the central bank to increase its limit to 15% this year.

HDBank’s loans outstanding at the end of the first quarter were worth VND162.06 trillion (US$6.9 billion), up 5.92% for the year, much higher than the industry average. It reported steady growth across all segments like inpidual customers, small and medium-sized enterprises and consumer loans.

It attributed the high growth rate to signing contracts with enterprises late last year.

Experts have warned that if these banks’ credit quotas for the year are not increased, they, the business sector and indeed the entire economy would face trouble.

Though exports are hit by the pandemic, the demand for investment and production of goods in the country remains high, meaning the demand for credit is still significant.

This year’s credit growth is likely to reach 9-10%, lower than the central bank’s 11-14% target, but any change is possible, they added.

Balance of trade, payments surpluses keep the VND steady

The COVID-19 pandemic has hit global trade hard, but some of Vietnam’s exports have escaped its worst effects, which has helped keep the VND-USD exchange rate steady.

In the first five months of the year Vietnam’s biggest export earners were processed and manufactured goods, of which 17 generated at least US$1 billion each.

Electronics, computers and accessories accounted for US$15.3 billion, a year-on-year increase of 22.1%. Exports of machinery, equipment, components, and tools reached US$8.5 billion, a 25% rise.

While several agricultural products saw a drop, coffee and cashew achieved slight increases.

According to the General Statistics Office, Vietnam’s total trade in the first five months was worth US$196.8 billion, a decrease of 2.8% against the same period last year. It enjoyed a surplus of US$1.9 billion.

This means there has been a substantial inflow of foreign currency, stabilising the exchange rate.

Since the end of last year the dollar rate at banks has appreciated by only VND92, or 0.24%.

Speaking about the influence of the yuan on the VND, experts said the depreciation of the Chinese currency has only had a marginal effect so far.

The confrontation between the US and China has shown no signs of ending, which could further depreciate the yuan, but the Chinese Government does not seem to have plans to sharply devalue the currency.

Meanwhile, Vietnam still pursues a strategy of keeping the exchange rate steady.

The country is also running a balance of payments surplus, which gives it a further cushion.

The VND is expected to escape volatility caused by external factors through this year.

Source: VNA
english.vov.vn

Related News

Stipulate implementation of centralized bilateral payments of the State Treasury at banks

Stipulate implementation of centralized bilateral payments of the State Treasury at banks

VCN - The Ministry of Finance (MOF) gathers feedback on the draft Circular regulating the management and use of accounts of the State Treasury opened at the State Bank of Vietnam (SBV) and commercial banks.
How does the Fed

How does the Fed's interest rate cut affect Vietnam?

VCN - In the latest meeting of the Federal Open Market Committee (FOMC), the Fed decided to cut interest rates by 50 basis points to a range of 4.75%-5%. Analysts have given different perspectives on this decision.
Bank profits improve but there are no expectations

Bank profits improve but there are no expectations

VCN - According to assessments of credit institutions, the overall business situation and pre-tax profit of the banking system in the second quarter of 2024 has improved but is not really clear in the first quarter. and did not meet expectations.
Another six months for debt restructuring but need to manage bad debt risks

Another six months for debt restructuring but need to manage bad debt risks

VCN - The decision to continue extending the debt restructuring period, keeping the debt group unchanged for another six months, is expected to continue to contribute to solving difficulties for businesses, reduce debt repayment pressure, and add resources for production and business recovery.

Latest News

Continue to handle cross-ownership in banks

Continue to handle cross-ownership in banks

VCN - The situation of excess share ownership, cross-ownership between credit institutions (CIs), CIs and enterprises, although has decreased significantly compared to previous periods, is still complicated and requires continued inspection and control.
Striving for average CPI not to exceed 4%

Striving for average CPI not to exceed 4%

VCN - According to the report of the Ministry of Finance, there are still some factors that put pressure on price levels in the remaining months of 2024, so the Ministry has updated 2 scenarios of average inflation in 2024 increasing in the range of 3.7-3.92%.
Delegating the power to the government to waive, lower, or manage late tax penalties is suitable

Delegating the power to the government to waive, lower, or manage late tax penalties is suitable

VCN - Discussing in groups about the project "1 law amending 7 laws" in the financial sector according to the program of the 8th Session on October 29, 2024, National Assembly delegates proposed that the Government should be assigned to make specific regulations on decentralization, granting the right to exempt and reduce taxes, and handling penalties for late payment of taxes...
Removing difficulties in public investment disbursement

Removing difficulties in public investment disbursement

VCN - According to the report of the Investment Department (Ministry of Finance), the estimated disbursement from the beginning of the year to October 31, 2024 is VND 355,616.1 billion, reaching 47.43% of the 2024 plan, reaching 52.29% of the plan assigned by the Prime Minister.

More News

State-owned commercial banking sector performs optimistic growth, but more capital in need

State-owned commercial banking sector performs optimistic growth, but more capital in need

VCN - According to the report sent to the National Assembly before the 8th Session of the Government on investment, management and use of state capital in enterprises nationwide in 2023, the business performance of the state-owned commercial banking sector achieved positive growth.
Rush to finalize draft decree on public asset restructuring

Rush to finalize draft decree on public asset restructuring

VCN - According to the Ministry of Finance, the draft Decree regulating the rearrangement and handling of public assets is being urgently completed by the Ministry of Finance to submit to the Government for promulgation.
Inspection report on gold trading activities being complied: SBV

Inspection report on gold trading activities being complied: SBV

The State Bank of Vietnam (SBV) has announced that inspections on compliance with legal policies in gold trading activities of credit institutions and gold trading businesses have been completed and an inspection report is being compiled.
Budget revenue in 2024 is estimated to exceed the estimate by 10.1%

Budget revenue in 2024 is estimated to exceed the estimate by 10.1%

VCN -The Government estimates that state budget revenue in 2024 will exceed VND 172.3 trillion, up 10.1% over the estimate, of which tax and fee revenue will reach 13.1% of GDP.
Ensure timely and effective management and use of public asset

Ensure timely and effective management and use of public asset

VCN – In order to promptly and effectively implement public asset management and use, ensuring compliance with legal regulations, the Ministry of Finance has just issued an official dispatch requesting ministries, branches and localities to comply with regulations in the Government’s Decree No. 114/2024/ND-CP dated September 15, 2024.
Accelerating decentralization in public asset management

Accelerating decentralization in public asset management

VCN - Amending the Law on Management and Use of Public Assets aims to improve regulations on accelerating decentralization and improving efficiency in management and use of public assets, and promoting financial resources, ensuring that the unified application the Law on Management and Use of Public Assets and other legal documents.
Difficulty in finding banks eligible to receive compulsory transfers

Difficulty in finding banks eligible to receive compulsory transfers

VCN - Reporting to the National Assembly, the State Bank of Vietnam (SBV) said that one of the difficulties in restructuring the credit institution system is the long process of finding and negotiating banks eligible to receive compulsory transfers.
Businesses can choose a suitable electronic invoice model generated from the cash register

Businesses can choose a suitable electronic invoice model generated from the cash register

VCN - The Ministry of Finance said that individual business households can choose a suitable model to apply electronic invoice solutions from cash registers, depending on the number of invoices used in the year, in the month and the current status of software solutions and technical infrastructure.
State budget revenue estimate 2025 assessed as positive level despite potential challenges

State budget revenue estimate 2025 assessed as positive level despite potential challenges

VCN – Deputy Prime Minister and Minister of Finance Ho Duc Phoc said that the state budget revenue for 2025 is estimated at VND 1,966.8 trillion, an increase of 15.6% compared to the estimate for 2024.
Read More

Your care

Latest Most read
Continue to handle cross-ownership in banks

Continue to handle cross-ownership in banks

VCN - The situation of excess share ownership, cross-ownership between credit institutions (CIs), CIs and enterprises, although has decreased significantly compared to previous periods, is still complicated and requires continued inspection and control.
Striving for average CPI not to exceed 4%

Striving for average CPI not to exceed 4%

VCN - According to the report of the Ministry of Finance, there are still some factors that put pressure on price levels in the remaining months of 2024, so the Ministry has updated 2 scenarios of average inflation in 2024 increasing in the range of 3.7-3
Delegating the power to the government to waive, lower, or manage late tax penalties is suitable

Delegating the power to the government to waive, lower, or manage late tax penalties is suitable

National Assembly delegates proposed that the Government should be assigned to make specific regulations on decentralization, granting the right to exempt and reduce taxes, and handling penalties for late payment of taxes...
Removing difficulties in public investment disbursement

Removing difficulties in public investment disbursement

VCN - According to the report of the Investment Department (Ministry of Finance), the estimated disbursement from the beginning of the year to October 31, 2024 is VND 355,616.1 billion, reaching 47.43% of the 2024 plan, reaching 52.29% of the plan assigne
State-owned commercial banking sector performs optimistic growth, but more capital in need

State-owned commercial banking sector performs optimistic growth, but more capital in need

According to the report of the Government on investment, management and use of state capital in enterprises nationwide in 2023, the business performance of the state-owned commercial banking sector achieved positive growth.
Mobile Version