The Race to the Top: How a Central Bank’s Bold Statement Spurred a Surge in Credit

According to the State Bank of Vietnam (SBV), as of the end of June, total credit outstanding reached nearly VND 14,400 trillion, up 6% compared to the end of last year. With credit outstanding at the end of 2023 at VND 13,569 trillion, the amount of credit injected into the economy in the first half was more than VND 810 trillion.

Previously, credit growth as of the end of May 2024 reached only 2.41% and reached 3.79% as of June 14. Thus, in June alone, the economy received an additional amount of about VND 487 trillion, higher than the total credit growth in the first five months. In the last two weeks of June, total credit outstanding expanded by nearly VND 300 trillion.

The acceleration of credit growth in the last weeks of June was something that some leaders of large banks had anticipated.

Sharing about this issue at the online conference of the banking industry on solutions to promote credit growth in 2024 on June 19, Vietcombank CEO Nguyen Thanh Tung said that as of June 17, the bank’s credit growth reached only 2.1%, an increase of VND 29 trillion, lower than in previous years. However, Mr. Tung expected that by the end of June, credit growth would reach 4.3%, by the end of September it would be 8.2%, and for the whole year, 12%. Thus, in the second half of June, the growth rate achieved was almost equal to that of the previous five months.

Reporting at the conference, Agribank CEO Pham Toan Vuong informed that by the end of May, credit outstanding reached VND 1,570 trillion, up only 1.24% compared to the end of last year. However, it is expected that by the end of June, the growth rate could reach 2.5%, meaning that the increase in June is equal to the total increase in the previous five months.

In the joint-stock group, MB’s CEO said that credit growth by the end of June could reach 6-6.5%, up from 4.5% recorded in mid-June. VIB’s leaders also forecast that the growth rate at the end of the second quarter would be about 2%, from 1.14% at the end of May.

Previously, credit growth had shown signs of recovery after receiving a negative rate in the first two months of the year. According to Ha Thu Giang, Director of the Credit Department for Economic Industries, SBV, the credit growth rate has gradually improved over the months, and the credit turnover that credit institutions have provided to the economy in the first six months of 2024 is higher than the turnover of the same period in the last three years.

Speaking at the conference, Deputy Governor Dao Minh Tu said that, unlike previous years, from the beginning of this year, the SBV has allocated the entire credit limit to commercial banks. Therefore, banks that cannot lend will transfer their credit limits to other banks.

“We will take strong measures against banks with low credit growth rates, especially in the context that the SBV has allocated the entire credit limit to commercial banks from the beginning of the year,” Mr. Tu said at the conference.

According to Mr. Tu, the SBV “will transfer the targets of banks with low credit growth rates to proactively create favorable conditions for banks that are able to develop credit in the future.”