A moderation in Vietnamese banks' credit growth is credit positive for their asset quality and capitalization, Moody's said.
Data from the State Bank of Vietnam showed that banks' total credit grew 14% in 2018, the lowest growth rate since 2014. The slower credit growth is primarily due to the central bank's tightening of credit growth limits given to banks. As a result of slower credit growth, banks will be encouraged to focus on borrower quality, which will improve asset quality in the long term.
In addition, the moderation in credit growth will lower pressure on capital, especially for state-owned banks, Moody's said.
Moody's expects Vietnamese banks' credit growth in 2019 to remain at around 14% as the central bank maintains its control and as the progress of raising new capital by state-owned banks remains slow.