Vietnam report slow credit growth in first-half 2013

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Stacks of money at a bank in Hanoi

Credit growth at Vietnam's four major state-owned banks has slowed over the last six months.

The statement was released in a recent report by Vietcombank Securities firm (VCBS) which also attributed the year-to-date first-half loan growth of 5.02 percent to smaller commercial banks' push on consumption loans.

The four major state-owned banks are Agribank, BIDV, Vietcombank, and Vietinbank.

The State Bank of Vietnam set the year's target at 12 percent, 7 percentage points higher than last year when the economy hit a 13-year low at 5.03 percent.

Vietcombank, the country's largest partly private lender, saw its outstanding loans fall 0.2 percent by July, an improvement from a fall of 1.6 percent a month earlier.

Loans at Vietinbank rose to 1.6 percent by June after a reversal of 3 percent in the first quarter.

Loans at Agribank expanded 4.2 percent in the first half, slow progress compared to its targeted growth of 11-13 percent for this year. But Agribank chairman Nguyen Ngoc Bao said his bank found it "not too difficult" to increase lending while the country has not shown many signs of recovery.

BIDV has yet to report its credit growth for the first half, but the rate was 1.2 percent in the first quarter.

Eximbank Deputy Director Pham Huy Thong said banks are facing difficulties boosting loans amid the stagnant economy, not to mention tighter requirements for lending since the banking system is making efforts to tackle high bad debt levels, the highest in Asia.

Vietnam recorded 4.9 percent economic growth in the first half, compared to 4.93 percent last year, putting it on track for its slowest annual expansion in 14 years. As banks are struggling to lend, at least 120,000 businesses have closed since 2011, according to official data.

The VCBS report said the slow credit growth can "partly explain" the reductions of the country's Purchasing Managers' Index (PMI) as money has not flown to manufacturing but consumption.

The index was 48.5 in July, still at the sub-50 level, signaling a third successive monthly contraction in the sector, according to HSBC.

The lending slump has lead commercial banks to shift to consumption loans, according to the VCBS report.

The Saigon Times news website quoted Nguyen Hoang Minh, deputy director of the State Bank of Vietnam's HCMC branch, as saying it was not good for the economy's recovery to have only small and medium-sized banks with strong loan growth.

He expected the growth rate to improve in the second half due to further interest rates cuts, but said banks still would not see a robust increase in credit growth because bad debt cleanup has yet to improve. 

The State Bank of Vietnam said non-performing loans accounted for 6 percent the total outstanding loans of $130 million.

It launched a $23.6-million asset company to buy bad debts late last year. But local and international experts are concerned that the "miniscule" company is in ineffective. They also said the bad debt level could be higher as official estimates lack transparency.

Low profits

The majority of banks have not publicly reported their financial statements for the first six months, but economists said worse performance than last year was predictable.

Sacombank, ABBank, and OCB have only posted estimates on pre-tax profits, which indicate that they are among the few lenders to have done well in the first half.

As of August 5, Navibank was the only of Vietnam's eight listed banks to post its balance sheet. The bank's profit after tax was VND10.5 billion, down 24 percent year-on-year.


The central bank recently said HCMC-based credit institution profits decreased by 16.5 percent year-on-year to VND4.76 trillion ($225.3 million). Of this, 88.3 percent came from lending, down 1.9 percentage points from last year.

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