Vietnamese banks may see up to 16% credit growth over next two years

Demand will come from the manufacturing, construction, and real estate sectors.

Vietnamese banks may enjoy credit growth of 15% to 16% over the next two years on the back of the country’s booming economy.

The ratings agency expects financing demand to increase, led by the manufacturing, construction and real estate sectors.

"We expect bank financing to play an important role in fueling Vietnam's growth," said S&P Global Ratings credit analyst Ivan Tan, noting that the country's domestic capital market is evolving and still relatively small at this juncture.

Banks have taken to capital conservation strategies such as dividend payment via stocks— rather than cash— to meet the country's credit needs, Tan said.

"We believe this would be sufficient to maintain capital levels, but not enough to raise it. Vietnam banks have one of the region's lowest capital levels,” he said.

Support measures such as a weak loan restructuring scheme and enhancements to property-related law will aid the underlying sector and could help manage credit risks.

By S&P’s forecasts, returns on assets for the banks will stay at 1%-1.2%.

Net interest margins are likely to decline due to competition for deposits and concessionary lending rates.