State Bank acts to curb credit growth amid transitory CPI pressure


The Governor of the SBV recently confirmed that banks will not be permitted to further extend credit growth beyond the level that was already agreed at the start of the year. It is common for banks to agree to an initial limit at the start of the year before applying for a further increase if conditions permit. In effect, this development means that systemwide credit growth for 2018 may be closer to 15% compared to our original expectation of 17%.

Bank 2018 Quota 1H18 customer loan growth YTD 1H18 blended credit growth YTD
VCB 15.0% 11.5% 11.3%
BID 14.0% 7.2% 7.2%
TPB 15.0% 16.3% 14.5%
ACB 15.0% 11.8% 11.8%
HDB 15.0% 15.2% 13.0%
VPB 15.0% 8.8% 6.8%
TCB 14.0% 3.6% 3.4%
CTG 14.0% 9.7% 7.3%
STB 13.0% 9.3% 7.7%
MBB 15.0% 11.2% 10.7%

While core YoY CPI in July remained benign at only 1.41%, overall CPI edged up to 4.5% thanks to food and fuel prices. As discussed in our macro report yesterday, the Government has already undertaken administrative measures to bring down prices of items that are under state control, such as healthcare.  This helped YoY CPI to edge down from 4.7% in June to the 4.5% figure in July, despite ongoing increases in pork prices.

This could prove to be a slight near-term hit to bank earnings expectations, but a healthy development for the economy given that credit growth continues to converge to more sustainable levels. By contrast, our expectation for nominal GDP growth this year is around 10.5%. Furthermore, the real economy continues to see strong performance despite softer credit growth YTD. IIP YoY growth reached 14.3% in July and real retail sales inched up to post 8.4% YoY growth.

Source : VCSC

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