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Could lower growth targets hinder property loans in Vietnam?

Finance Markets / Latest Activity

Australia

Mar 16 2017

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Al Gerard de la Cruz, Property Report

Vietnamese credit growth rose 1.23 percent year-on-year in the first two months of 2017, up from the 0.33 percent growth seen in the same period last year, according to the Ministry of Planning and Investment. However, lenders still exercise caution in an effort to maintain lending quality.

Several credit institutions across Vietnam have set lower credit growth targets this year, VietnamNet reported. Vietcombank, one of the country’s largest banks, has targeted a credit growth of 18 percent this year, down from their 2016 target of 18.9 percent last year.

Similarly, the State Bank of Vietnam will tighten credit to risky areas, including real estate and BOT and BT projects in transport.

Pham Hong Hai, general director of HSBC Vietnam, agreed that real estate and securities are potentially risky areas befitting of tighter lending controls. High credit growth targets would only be deleterious to the security of capital inflows in the future, he told the Banking Times.

The state bank issued SBV Circular 06 last year that further loaded the risk weight for real estate loans, which rose to 200 percent from 150 percent at the end of 2016. Raised risk weights will compel lending institutions to raise their capital adequacy ratio to 9 percent at a minimum, should they want to expand credit to borrowers in the property segment.

Conservative growth targets are widely believed to be in anticipation of potential global turmoil precipitated by trade protectionism from the US, a longstanding economic ally of Vietnam.

SOURCE: Property Report

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