New circulars to promote credit growth: securities broker
The State Bank of Vietnam’s (SBV) two new circulars are expected to have positive impacts on banks with a high proportion of real estate or consumer loans, and promote credit growth amid excess bank liquidity, according to top Vietnamese broker VNDirect.
The SBV on Monday announced the issuance of Circular 02 allowing credit institutions and foreign bank branches to reschedule debt repayment deadlines and keep debt categories unchanged to support struggling customers.
On the same day, the central bank announced Circular 03 on ceasing the effect of Clause 11, Article 4 of Circular 16 dated November 10, 2021 on the purchase and sale of corporate bonds by credit institutions and foreign bank branches.
According to VNDirect, the two circulars are to materialize the government’s Resolution 33 dated March 11, 2023 on some measures to remove barriers for and promote the safe, healthy, and sustainable development of the real estate market.
Circular 02 stipulates that credit institutions can reschedule debt repayment deadlines and keep the debt categories unchanged for production-business and consumer loans; and adjust the method of making provisions for the above loans.
“This circular will partly remove the liquidity problems of enterprises, thus saving those with good fundamentals,” the broker said.
As the ailing real estate market is a matter of concern for the banking industry, Circular 02 will help ease the provision pressure on banks when rescheduled debts will be paid in 2023 and 2024, it added.
VNDirect believed that the circular will have a positive impact on investor sentiment toward banks with a high proportion of real estate or consumer loans in their credit portfolio like Techcombank, MBBank, VPBank, and HDBank because these banks are facing higher provisions than others with fewer real estate loans at this time.
Meanwhile, Circular 03 allows credit institutions to buy back corporate bonds unlisted on the stock market or unregistered on the unlisted public company market that they sell without having to wait 12 months from the date of selling as currently stipulated in Clause 11, Article 4 of Circular 16.
“This is also a way for banks to promote loan growth through the redemption of corporate bonds, in the context of weak credit growth, about 2% in the first quarter of 2023, and excess liquidity at banks,” VNDirect said.
The circular will also help increase bond demand and benefit banks that are active in the corporate bond market like Techcombank, MBBank, and VPBank. However, in the current context, these banks must prioritize risk management and asset quality balance other than growth goals.
Ha Thu Giang, director general of the SBV’s department of credit for economic sectors, said that rescheduling debt repayment deadlines and keeping debt categories unchanged serve to support and remove difficulties for customers.
However, credit institutions still need to evaluate, classify and make provisions based on customers’ actual debt categories, she said, noting that according to Circular 02, credit institutions must make a provision of at least 50% of total outstanding loans in 2023 and 100% in 2024.
Can Van Luc and his co-workers from the BIDV Training & Research Institute said that Circular 03 will support corporate bond investors and issuers with cash flow to pay part of the amount of corporate bonds maturing in 2023, mainly in Q2 and Q3, thus maintaining production, business and investment and consumption activities.
"However, enterprises must ensure good financial health and business performance to win the highest internal credit rating of credit institutions," they wrote.
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