Bangkok Bank seeks higher Vietnam lending

Robust economic performance spurs request for central bank to raise loan-growth limit

Bangkok Bank’s Vietnam branch has sought the Vietnamese central bank’s permission to raise its lending growth target for this year after loan expansion during the first half approached the regulatory limit of 15%.

The branch’s loan growth is likely to reach 30% this year after 13% growth in the first half, said Tharabodee Serng-Adichaiwit, senior vice-president and general manager of Bangkok Bank’s Vietnamese operations.

Loan demand remains positive this half, supported by robust economic growth in neighbouring countries.

Vietnam’s central bank started capping loan growth for both local and foreign financial institutions at 15% annually from last year as part of attempts to keep a lid on inflation, manage the exchange rate and maintain the interest rate at a low level to propel economic growth.

But the regulator lets financial institutions request lending limit extensions on a case-bycase basis.

Apart from Bangkok Bank, other banks have also asked to exceed the threshold, Mr Tharabodee said.

Vietnam delivered strong economic growth of 7.08% year-on-year in the first half, compared with a full-year growth projection of 6.8%. Inflation was at 3.29%, below the central bank’s 4% target for this year.

The Vietnamese dong mirrors the regional currency trend, falling about 1% against the US dollar since the end of 2017, while the country’s exports for the first half grew 16% year-on-year.

The rising number of middle-income earners and a large, young population are other factors supporting economic growth. Vietnam has 14 million middle-income earners, a figure expected to more than double to 30 million by 2020. The country’s household debt is below 20% of GDP.

Mr Tharabodee said the Vietnamese branch’s healthy loan growth resulted from the real sector, particularly in energy, agriculture, manufacturing, food and garments. Thai customers, representing 47% of the total loan portfolio, were the biggest growth contributor, followed by multinational companies at 43%, with local clients making up the rest.

“We aim for local customers to account for 50% in the next 5-10 years, in line with positive domestic consumption and investment growth,” Mr Tharabodee said. “Large local companies are also the bank’s key target group.”

Despite strong loan growth, the bank can keep its non-performing loan (NPL) ratio at a satisfactory level of 0.3%, well below the industry’s average bad loan ratio of 2.3-2.5%. The bank’s loan-loss provisions are quite strong at 7-8 times NPLs, while net interest margin (NIM) exceeds the industry level.

Deposit interest rates in Vietnam’s banking industry are in a range of 3-5% versus lending rates of 4-6%, leaving NIM at 2.8%.

We aim for local customers to account for 50% [of loans] in the next 5-10 years. THARABODEE SERNG-ADICHAIWIT GENERAL MANAGER OF BANGKOK BANK’S VIETNAMESE OPERATIONS