Vietnam banks see 2016 credit growth at 21.8 percent: central bank survey

By VnExpress October 10, 2016 | 07:59 pm PT

Garment factory workers in Vietnam. Photo by the International Labor Organization

That would be higher than the central bank's target of between 18 and 20 percent for the year, and a sharp rise from last year.

Banks in Vietnam expect lending this year to exceed the central bank’s target, growing 21.82 percent from the end of 2015 as improved business conditions have spurred credit demand, according to a new survey by the central bank.

The State Bank of Vietnam has targeted credit growth of between 18 percent and 20 percent this year, up from 17.26 percent in 2015.

Vietnamese lenders said deposits in the local currency may grow 16.85 percent this year, but they forecast a decline in foreign currency deposits to 6.9 percent, following sharp cuts in interest rates, the survey found.

As many as 87.6 percent of the banks participating in the survey said their liquidity in the Vietnamese dong and foreign currencies remained good.

Loans between January and September grew 11.74 percent, up from 11 percent for the same period last year, the central bank’s deputy governor Nguyen Thi Hong told legislators last Friday. She also said that the 1.6 percent growth of loans in foreign currencies in the period was in accordance with the government's policy against dollar hoarding.

Some policymakers said the annual credit growth target of 18-20 percent for this year was quite high and risky to the economy.

In response, the central bank’s deputy governor highlighted the fact that bank loans remain a key source of funds for the fast-growing economy.

She added that with a 15-16 percent increase in loans, local businesses would be faced with a critical funding shortage to expand their business.

The central bank has also aimed to bring down bad debts in the banking system to below 3 percent of total outstanding loans for this year.

An overhang of bad debts has been a burden on Vietnam’s economic growth since 2012 when total bad debts, mostly in real estate sector, reached VND280 trillion ($12.5 billion), equivalent to 11 percent of gross domestic product.

Bad debts in the banking system as of August 31 were reported at 2.66 percent, according to the central bank’s data.

Bank lending to the property sector in the first eight months of this year grew 6.73 percent, compared to about 13.06 percent in the same period last year.

During the January-August period, banks have fully written off VND58.8 trillion in non-performing loans, official statistics show.

The Vietnam Asset Management Company, which was set up in 2013 to buy bad debts from troubled banks, has so far this year tackled with VND16 trillion of bad debts from the books of banks, significantly down from the same period last year, said deputy governor Hong.

Vietnam's economy was originally expected to grow 6.7 percent this year, following 6.68 percent growth in 2015. However a slowdown in the agriculture and mining sectors has forced the government to revise down the 2016 target to between 6.2 percent and 6.5 percent.

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