What will banks do when their credit quotas run out?

SBV’s Governor Le Minh Hung has released Instruction No 04, saying that the watchdog agency will not consider adjusting credit growth limits in the second half of 2018, unless the adjustment is needed for the restructuring of weak banks.

A report shows that the outstanding loans of the entire banking system grew by 6.5% in the first half of the year, while the credit growth limit set for banks set earlier by SBV is 12-14%, a level high enough to ensure economic growth.

However, specific banks still want additional quotas.

While the credit growth of the whole system is slowing down, some top-tier banks have seen credit growth rates equal to or higher than the permitted levels, according to the HCMC Securities Company (HSC).

This means that the banks will not be able to expand credit in the last months of the year.

LienViet Post Bank, which ranked third in terms of credit growth rate in the first half of the year, has announced the adjustment of its profit plan for 2018. Its targeted profit has been lowered by 33%, from VND1.8 trillion to VND1.2 trillion.

According to LienViet Post Bank’s chair Nguyen Dinh Thang, the bank gained a credit growth rate of 20% in 2017. It drew up the business plan for 2018 based on the figure, though the central bank set the limit of 14% earlier this year.

Deputy CEO Nguyen Thi Thanh Son admitted the ceiling of 14% will affect the bank’s operation.

Instead of trying to provide new loans, the bank is planning to restructure credit by reducing loans to big clients and focusing on retail banking, targeting inpidual clients and SMEs.

“The group of clients bears higher interest rates, thus allowing the bank to improve its NIM, once the credit growth is restricted,” Son explained.

The measure is one of the four HSC mentioned in its latest report which it believes can help ease the negative impact from SBV’s Instruction 04.

According to HSC, banks can also lower the deposit interest rates and raise the lending interest rates to support their business activities; step up non-credit services and cut the operation costs.

They can also contribute to the restructuring of weak banks to be able to enjoy additional quotas.

HD Bank, for example, may get benefits from the fourth measure. It is awaiting SBV’s approval for the plan on admitting PG Bank.