Banks to shift to retail lending to gain credit growth

Customers make transactions at a bank in Hà Nội. According to financial reports of 16 banks, the proportion of outstanding loans to individual customers at the end of the second quarter of 2024 decreased by 2.8 percentage points to 38.96 per cent against the end of last year. Photo chinhphu.vn

HÀ NỘI — Many banks, which used to focus on lending to individual (retail) customers, have had to shift to expanding corporate lending to achieve credit growth in the first half of 2024.

In the first half of 2024, corporate credit became the main driver of growth for many banks. Some banks such as VPBank, VIB and TPBank, which were known for specialising in lending to individual customers and classified by many organisations as retail banks, recorded outstanding corporate loans of more than 50 per cent by the end of the second quarter of 2024.

According to financial reports of 16 banks, the proportion of outstanding loans to individual customers at the end of the second quarter of 2024 decreased by 2.8 percentage points to 38.96 per cent against the end of last year.

Nguyễn Thế Minh, Director of Research and Development of Individual Customers at Yuanta Securities Vietnam Company, said banks had not dared to lend to individual customers, because they were afraid of the risks.

In the context of a difficult economy, especially after the pandemic and the bad debt increase, the most sensitive subjects are still individual customers. It is possible to recover debts from enterprises, but it is very difficult to recover debts from individuals, according to Minh.

Minh predicted that retail credit would improve next time when unemployment decreases and people’s income increases.

Previously, banks focused heavily on corporate credit growth. However, they could increase the credit ratio of individual customers in the third and fourth quarters of 2024, Minh forecast, explaining that the risk of lending to the individual customer group was decreasing.

Lê Hoài Ân, a lecturer at the Banking University, said that in the first half of this year, individual lending remained limited and banks were quite selective in choosing customers.

Ân said if the economy recovers, along with the application of the State Bank of Vietnam’s Circular 12/2024/TT-NHNN, it would be a boost for the consumer sector and retail lending.

Under Circular 12/2024/TT-NHNN, which took effect from last month, for small loans not exceeding VNĐ100 million, borrowers will not have to provide feasible capital use plans and related personal information to credit institutions.

The new policy aims to simplify procedures for granting small value loans, which will contribute to creating more favourable conditions for customers to access bank credit in their daily lives and minimise illegal usury. In addition it will help banks expand retail lending activities.

According to banks, borrowers often ask for small loans to meet their consumer needs, so it is difficult for them to have adequate and accurate reports to prove feasible capital use plans. — VNS