Following an improvement in the first half of the year, the positive performance trend would continue for the banking industry in the second half thanks to high credit growth and supporting policies on settling non-performing loans (NPLs).

This was the forecast of analysts from the Vietcombank Securities Company (VCBS).

VCBS analysts said credit growth target of 21-22 per cent this year may be feasible as lending often

rises sharply during the latter months of the year. By August 21, credit growth reached 10.06 per cent, compared with 9.01 per cent during the same period last year.

According to VCBS, at the end of the second quarter, some banks had used up to 70 per cent of their credit growth limits set by the State Bank of Vietnam (SBV) and may apply for a quota increase.

In the case that the SBV approves the banks’ proposal, credit growth of the entire banking sector this year is likely to be strengthened further, especially in the context of a favourable macro economy and the Government’s support to help enterprises access bank loans at preferential interest rates.

However, if the SBV does not approve the proposal, the banks will be more motivated to structure loans, select better clients and improve asset quality.

VCBS analysts also expected that the settlement of NPLs will be strengthened in the second half of 2017 after support policies were approved by the National Assembly.

“New policies could have a positive impact by improving debt recovery with collateral, boosting the Vietnam Asset Management Company (VAMC)’s participation. It could also support new cash flow and liquidity in the debt trading market thanks to the participation of new investors."

Accordingly, if these policies are effectively implemented, the secondary trading market for NPLs is expected to be put into operation soon. It will help accelerate the settlement of bad debts and stimulate the flow of capital to the economy.

Of course, the analysts noted, this should go hand in hand with active co-ordination and support from both the Government’s policies and relevant regulatory authorities.

VCBS analysts also forecast that the pressure to raise deposit interest rate may return, but the SBV can still apply several measures such as relaxing of Circular 06 on lending or increase of dollar purchases to stabilise the rate.

“The pressure to raise deposit rates has lightly reduced in the second quarter of 2017. However, if the commercial banks does not get the expected support, the pressure to raise deposit rates will quickly return due to the acceleration of credit growth in the second half of the year.” — VNS