Credit growth in Vietnam is expected to hit 3.8% in the second quarter of 2024, reflecting a moderate recovery in the nation's banking sector, according to a survey released by the State Bank of Vietnam.

Credit institutions also see bad debt ratios beginning to stabilize after a concerning rise in 2023.

The cautious optimism comes as credit growth slowed to just 0.26% in the first quarter of 2024. Deposit and lending rates are predicted to remain low in the coming months, indicating continued conservative policies.

Although banks see a slight improvement in customer risk profiles for 2024, their expectations are lower than previous surveys. This signals potential headwinds as the economy navigates a post-2023 recovery.

However, signs of improvement are present. Capital mobilization across the system is predicted to rise 3.5% in the second quarter, while credit balances should also tick upwards. While these are lower figures than initially forecasted, they still represent positive movement.

Furthermore, banks expect bad debt ratios, a key indicator of financial health, to decline in the second quarter of 2024. This suggests increasing confidence that problematic loans may soon be under better control.

Overall, banks believe business conditions and profit margins will begin to improve after a difficult first quarter. However, there's still a lingering shadow of uncertainty as the year progresses.