Banks are finding ways to boost lending in the rest of the year

Speeding up disbursements to spur demand HCMC arranged three consecutive lender-borrower matching conferences in mid-October, VND20 trillion in loans pledged. In the year up to October, the city had facilitated 34 such events, matching the record-breaking number of events held in 2023. Another milestone was loan disbursements, which amounted to VND548.3 trillion at 17 participating commercial banks, 7.5% above the initial target, according to the State Bank of Vietnam (SBV) branch in HCMC. This year’s pledged loans are already 12% higher than the 2023 level, which indicates an increase in available funding. Nguyen Duc Lenh, deputy director of the SBV branch in HCMC, noted that credit expanded by 8.5% in the city in the first nine months of the year. Banks have been extending significant loans to both individual and private sector customers. “This indicates strong demand for credit from the private sector, to which banks are responding effectively,” he said. Data from the SBV showed that Vietnam’s total credit grew by around 9% in January-September. In a recent press briefing, a SBV leader said there was ample liquidity in the banking system, with room for further credit expansion. At a recent lender-borrower matching conference in HCMC, Hoang Minh Ngoc, deputy general director of Agribank, said that the bank had launched six credit packages this year, including a VND20-trillion package offering rates as low as 2.6% for terms under three months, and a VND50-trillion package with rates being 0.5 to 1.5 percentage points lower than normal for clients involved in clean, high-tech farming. According to Ngoc, these conferences aimed to bridge the information gap between businesses and banks, strengthen partnerships and streamline the loan application process. However, challenges extend beyond mere information gaps. Mismatches in capital supply and demand, coupled with banks’ need to balance capital costs against loan quality, continue to hinder efforts to stimulate year-end credit growth. Pressure to boost lending Data from Techcombank showed robust credit growth through September 2024, with home loans rising 6.6% over the previous quarter and 13.2% year-to-date. Corporate lending increased by 2.9% in the quarter and 16.3% in the year to date, with consumer loans driving much of the third-quarter growth. Several other banks also reported similar credit expansion during the quarter. However, the SBV highlighted inconsistencies at a recent press briefing, noting that while some banks met or exceeded their growth targets, others saw a lending contraction. This year, the SBV adopted a more flexible approach to credit growth quotas. Starting August 28, banks that achieved at least 80% of their annual credit growth targets were eligible for additional credit growth quotas. A survey released in early October by the SBV’s Forecasting and Statistics Department provided new insights into capital demand. Banks have revised their 2024 loan growth forecasts down to 13.2% from the previous estimate of 14.1%. While deposit rates are gradually increasing, lending rates have remained low. Ngo Dang Khoa, head of Markets and Securities Services at HSBC Vietnam, noted that banks are facing compressed net interest margins (NIM) due to rising funding costs as credit growth outpaces deposit growth. They are also struggling to attract borrowers. “The question is, how long can banks sustain this trend?” Khoa said. On the bright side, most analysts expect lending rates to remain stable, backed by pro-growth policies. Experts believe that the annual credit growth target of around 15% is still achievable. At a mid-October conference, a representative from Thai Son Nam Company noted that businesses are exercising caution. Despite lower lending rates, firms are focusing on cash flow management, reducing debt, and encouraging advance payments from clients. “Stable businesses are prioritizing debt reduction and seeking banks with better lending policies,” the representative said. A recent report by SSI Securities Company highlighted a skewed growth trend, with lending to real estate businesses surging 16%, while consumer real estate loans (for home purchases and repairs) edged up by only 4.62%. “This indicates a limited recovery in household credit demand, even with attractive loan rates,” SSI concluded. Overall, banks are coming under significant pressure. They must balance rising input costs with the need to attract customers and meet year-end growth targets. This involves not only fulfilling credit targets but also providing capital to support GDP growth, all while maintaining loan quality as debt restructuring policies near expiration. With fiscal policy underperforming, monetary policy is playing a more active role, even as public investment disbursements are below targets.