Vietnam banks see 2016 credit growth up 20 percent on year

By Reuters July 6, 2016 | 08:44 pm PT

Vietnamese banks are lending more: Is it good news to the economy?

Banks in Vietnam expect lending this year to surpass targets, growing 20.4 percent over 2015, fuelled by stronger credit demand and better business conditions, the central bank said on Wednesday.

The Southeast Asian nation has targeted credit growth of 18 percent to 20 percent this year, up from 17.26 percent in 2015, as the economy expands, following growth last year that was its strongest since 2007.

Most banks see better annual results than last year and improved second-quarter liquidity over the January-March period, according to a quarterly survey by the State Bank of Vietnam published on its website.

Vietnamese lenders have rebounded strongly from a financial crisis in which bad debts were as much as 17.2 percent of total credit in 2012. But the toxic loans ratio was cut to 2.55 percent last year, central bank data shows.

Most Vietnamese banks posted strong growth in the first quarter, with Vietcombank, the top lender by market value, reporting a jump of 62 percent in annual net profit, while VietinBank had growth of 54 percent.

BIDV, the biggest listed bank by assets, expects pre-tax profit to grow 20 percent in the first half of the year.

Vietnamese banks expect deposits in the dong currency to grow, but expect a decline in foreign currency deposits, a reversal from their last forecast for growth of nearly 7 percent, the survey showed.

The central bank has gradually cut or scrapped ceiling rates on dollar deposits to combat dollar hoarding and even abolished some dollar lending, but it recently resumed short-term loans in foreign currencies to support economic growth.

Vietnam's economy is targeted to grow 6.7 percent this year, following 6.68 percent growth in 2015, but weather woes have cooled growth in the first two quarters to the slowest in two years.

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