Banks are concerned that credit risk will increase slightly in 2023

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The credit growth is forecast to decelerate in 2023. Photo: Internet

More than 50% of credit institutions maintain credit standards

The Department of Forecasting and Statistics (SBV) has just announced the results of the survey on credit trends of credit institutions in December 2022. The results show that credit institutions forecast that the overall credit demand will continue to increase in the first six months of 2023 and the whole of 2023 for all fields, subjects, currencies and tenors; in which it is forecast that short-term credit demand will increase higher than medium and long-term; demand for loans in VND is higher than in foreign currencies.

In specific lending sectors, in 2023, the manufacturing and processing industry continues to be the field with the highest number of credit institutions forecasting credit demand, ranking second is the construction sector instead of the residential housing purchasing sector was recorded in the survey in June 2022, followed by transportation and warehousing investment and import-export business.

It is forecast in the first six months and the whole of 2023, four sectors: wholesale, retail; export and import; lending for living needs and food and beverage production with the highest proportion of credit institutions expected to be the driving force for credit growth of the credit institution system.

Credit balance of the whole credit institution system is expected to increase by 4% on average in the first quarter of 2023 and by 13.7% in 2023, adjusted down by 1.9 percentage points compared to the expectation in the previous survey period.

In addition, credit institutions are concerned that the overall credit risk level continues to increase slightly in most areas except for a few areas of loans for the development of agriculture, forestry and fishery, and loans for investment in high technology applications, loans for investment in supporting industries, loans for processing and manufacturing industries are expected to reduce risk. The two sectors that are forecast to still have the highest credit risk are real estate investment loans and securities business investment loans.

In the first six months of 2023 and the whole of 2023, more than 60% of credit institutions are expected to maintain their credit standards, and only about 20% of credit institutions are expected to "lightly tighten" standards, but the degree of tightening has decreased compared to the last six months of 2022 and the whole year of 2022, and about 17% of credit institutions are expected to "relax".

It is expected that the "tightening" will mainly take place in the fields of real estate investment and business loans, financial business loans, banking and insurance, medium and long-term loans and loans in foreign currencies.

In addition, credit institutions believe and expect to "tighten" mainly on requirements for collateral, additional terms in credit contracts, minimum credit rating requirements of customers and credit limit to ensure safety; while continuing to make efforts to narrow the gap between lending interest rates and the average cost of capital for production and business lending activities to support the economy.

Be careful in credit management

In 2022, according to the SBV, credit of banking system grew by 14.5%, higher than the same period last year. However, according to experts of VNDirect Securities Company, credit growth has slowed down markedly when macroeconomic stability is the Government's top priority in 2022 and in the coming years. Therefore, VNDirect's experts forecast that credit growth will continue to slow down and reach about 12% in 2023 due to the weak real estate market, decelerating export growth and high interest rates.

Experts at Mirae Asset Securities Company forecast that credit growth in 2023 will be below 14% as the target in 2022. Analysts of Rong Viet Securities Company (VDSC) estimate credit growth of the whole industry this year will be around 11-12%. The reason was also pointed out that credit demand decreased in the context of rising interest rates along with economic growth drivers tending to decline; view of limiting credit to risky areas of the operator.

In fact, credit in 2022 has doubled in deposit growth, which puts a lot of pressure on the banking industry. Along with high inflation pressure, Vietnam's high credit leverage ratio also makes the banking industry cautious in credit management.

According to the State Bank of Vietnam, Vietnam is one of the countries with the highest credit leverage ratio in the world (the ratio of outstanding credit to GDP is up to 124%).

Pham Chi Quang, Director of the Monetary Policy Department (SBV), said that with a credit growth rate of over 12% per year, credit will always grow twice as much as GDP, making leverage credit increases, and affecting the safety of the banking system.

Therefore, the credit target in 2023 will be carefully considered by the SBV. The SBV's point of view is to provide adequate and timely capital for the economy but not be subjective to inflation.