According to the current regulation, the SBV sets a credit growth limit for the entire year for each bank – depending on its health – to ensure the credit growth target of the entire banking system during the year (14 per cent for 2019).

This year, the highest credit growth limit of 15 per cent was assigned to the group of banks which met the Basel II’s standards earlier than the SBV’s deadline of 2020. The remaining banks, meanwhile, were allocated a lower rate of below 12 per cent.

Last year, most banks were assigned higher credit growth limits, ranging from 14 per cent to 16 per cent.

The credit growth target of the entire banking system and of each bank has tended to slow in the past two years. Experts attributed the slowdown to the SBV’s policy changes. Previously, due to the underdevelopment of the local stock market, banks, which should act only as intermediaries in the monetary market, had to function to fund medium- and long-term capital for the economy.

However, the SBV has tried to gradually change the role of banks so as to make them fund only short-term capital for the economy through the provision of working capital loans for businesses and households.

To make the change, the SBV required banks to lower the ratio of short-term funds for medium and long-term loans from 45 per cent in 2018 to 40 per cent since early this year.

Experts have also agreed with the credit growth slowdown, saying it was necessary to improve banks’ credit quality and risk management.

Nguyen Xuan Thanh from Fulbright University Vietnam said currently, the pressure on credit growth to support economic growth was not so high, so the allocation of a credit limit to each bank depending on its health was reasonable. Accordingly, banks should only boost credit in case of good control of risks, in order to ensure sustainable growth.

To offset the revenue reduction from lending activities, banks said they plan to increase profits through cutting operating costs and promoting digital services.

Do Minh Phu, chairman of TPBank, said digital banking would play a major role in reducing operating costs and increasing the cost-to-income ratio (CIR) efficiency, contributing to improving the bank’s profits this year.

Phu said the biggest costs in banking operations were the costs of network investment and development, along with the costs for personnel, which could be solved by the application of digital banking. Attracting customers to non-credit services and service fee collection was also becoming a trend.

Sharing the same view, Nghiem Xuan Thanh, chairman of Vietcombank, said that 2019 would be the year of digital banking for Vietcombank. In the past three years, the bank had focused on investment and implementation of a new core banking system to boost service development and shift the revenue structure instead of relying heavily on credit.

Developing digital banking combined with retail banking in a potential market of 95 million with a high percentage of young people means commercial banks were quickly accumulating a customer base and large payment needs, Thanh said.

The focus on digital banking combined with retail banking has also helped some banks, like Vietcombank, Techcombank and HDBank, increase their number of individual customers rapidly in recent years, which has also contributed to raising the banks’ current account savings accounts (CASA) significantly.

Reports showed some banks last year raised CASA to 28-30 per cent in the total structure of deposits. The large proportion of low-interest rate deposits has helped banks reduce mobilisation and operating costs, increasing profits and improving marginal interest in lending. — VNS