Although credit growth by the end of June reached 6 per cent as per the target, it decreased in July. What are the reasons why credit growth is still a concern for the entire economy?

In terms of credit growth, many solutions, policies and credit programmes have been implemented synchronously and effectively by the State Bank of Vietnam in order to ensure sufficient capital supply for the economy growth.

Pramoth Rajendran, head of Wealth and Personal Banking, HSBC Vietnam

Thanks to the timely implementation of many policies, credit growth has turned positive again since March this year. As of the end of June 2024, credit growth increased by 6 per cent compared to the end of 2023, with credit being channelled to key economic sectors, as well as to emerging trend such as green credit.

However, it is also worth noting that credit growth has appeared to slow down since the beginning of July compared to the end of 2023. There are some passive drivers behind the move, such as uneven recovery among industry groups, which limits overall demand from the business sector, while credit demand for real estate has not fully recovered due to a delay effect after policy adjustments to support the market.

In addition, overall domestic credit demand has not yet recovered strongly, many production and service sectors, which are traditional driving forces of the economy, still face certain headwinds. Certain segments have credit demand but have not yet developed a feasible business plan, and are yet to meet loan conditions, along with changes in individual's consumption trends are also some of the main reasons behind the recent slowdown in credit growth.

That said, the government has emphasised the importance of quality credit growth as a vital factor to contribute to promoting sustainable growth.

In that context, consumer credit by May 2024 only inched up 1.1 per cent. What is the reason for this low rate and what are the solutions?

In terms of consumer lending, unlike external-facing sectors in which the recovery has started to broaden out to non-electronics trade, the domestic sectors may wait longer for a full rebound.

In fact, retail sales growth has not fully returned to the pre-pandemic trend. Based on our in-house research estimates, there is still a gap below the pre-pandemic level. However, the tourism-related services continue to sustain the positive momentum, after Vietnam welcomed more than 8.8 million tourists in the first half of this year.

That said, government policies remain in place to provide some domestic support. The National Assembly recently approved the extension of the 2 per cent VAT cut until year-end, while also cutting certain fees for selected industries, which is likely to help support the domestic sector to an extent.

Therefore, there are reasons to be optimistic on the rebound in consumer credit in H2. As the external recovery continues to broaden out, the spillover effect should ultimately translate into the domestic sector, which is likely to be more forceful in Q4 of this year.

We also observe an increase in demand for mortgages, which will drive consumer credit growth. From the banking sector, there are some particular solutions in focus to boost credit growth in general.

The solutions are focusing capital on sectors that are driving forces for development such as trade, investment, consumption; restructuring retail portfolio, individual customers, focusing more on foreign direct investment, multinational corporations, and export enterprises showing signs of recovery from now until the end of the year; and continuing to invest capital in key projects for sustainable development.

The recent regulations from government to strengthen and standardise onboarding and biometric authentication is a significant step towards identifying the right customers and reducing identity frauds, thereby allowing banks to lend with more confidence.

All in all, we believe Vietnam remains on track to see brighter growth prospects in 2024, which likely set Vietnam to be the fastest-growing economy in ASEAN in 2024.

At HSBC, to promote financial literacy, we regularly publish meaningful content to educate customers on lending products, demystifying banking terminology, interests, fees, tips to avoid fees and emphasise responsible borrowing.

We offer a range of credit cards, personal loans and home loans to suit the lending needs of diverse consumers. We are constantly introducing new products and solutions to expand the unsecured consumer lending business in Vietnam, thereby capturing the opportunities from the rising consumption power of the fast-growing rising affluent population.

Our recently launched HSBC Live+ Credit Card is a great example that makes dining, shopping, and having fun more rewarding for our customers by offering up to 8 per cent cash back and instant discounts of 15 per cent or higher at over 200 restaurants in Vietnam and across Asia.

We are also constantly enhancing our lending onboarding journeys to make them frictionless and more convenient for our customers. This also reduces the reliance on traditional sources of documentation and credit assessment. We are also constantly expanding our partnerships with digital platforms and aggregators to increase the reach and access to our lending products and solutions.

Despite low interest rates, individual customers’ savings deposit still reached a record of nearly $280 billion, accumulated to the end of March. Customers might be still concerned about spending heavily. What is your take on this?

Our research shows that middle income segments in Vietnam are continuing to grow, both in terms of number of individuals as well as their disposal incomes, and this segment is increasingly focused on saving for the future.

This, coupled with a young demographic profile with many millennials entering the workforce, has contributed to higher savings balances in the financial system.

I agree that customers continue to take a cautious approach post-pandemic. This risk-averse behaviour is driven by the economic uncertainties, higher inflation, and interest rates.

Vietnamese culture traditionally places a strong emphasis on saving for the long term, and this savings mindset is likely to persist even as interest rates decline. Additionally, relatively low levels of household consumption, especially for big-ticket items, have resulted in higher disposable incomes being directed towards savings.

In addition to general customers, banks also focus on the high net-worth segment. Can you share some data on the priority needs and spending attitudes as well as investment needs of this wealthy group?

Vietnamese affluent segment is showing a strong growth, consistent with the anticipation of Vietnam witnessing one of the world’s sharpest increases in the number of wealthy people in the next decade, in terms of GDP per capita and number of dollar millionaires and this segment continues to be one of the key focuses for HSBC Premier proposition.

HSBC Vietnam recently announced significant enhancements to its Premier banking service, aiming at enriching the lifestyle and banking experiences of its affluent clientele. These improvements, which include a suite of upgraded features that promise to bring customers a new level of privilege and convenience, are based on insights gained from HSBC Vietnam’s recent survey of high net-worth segment in Hanoi and Ho Chi Minh City.

Our survey on this has shown that affluent people’ top life priorities include supporting their children’s future (64 per cent), investing in significant assets like homes (59 per cent) and maintaining health and wellness (55 per cent).

While 67 per cent of participants in the survey prioritise for investment to generate more profits, they also tend to invest most in real estates (96 per cent), precious metals and commodities such as gold (68 per cent) and stocks (61 per cent), and quite open to take short-term risks (nearly 50 per cent).

Approximately 85 per cent of the survey’s subjects show their preference for online activities, from news update, shopping to bank transactions.

These patterns are very aligned with the vigorous growth of Vietnamese wealthy people in the digital era in recent years. Therefore, HSBC’s recent upgrades in affluent customer segment aim to provide them with a luxurious and international lifestyle, convenience, and consultancy for wealth investment.