The report on Socioeconomic statistics in the first quarter (Q1) of 2020 recently released by the General Statistical Office (GSO) pointed out that the market has initially been affected by the Covid-19 pandemic.
The banking sector which is said to be less hit by the disease has actually seen the least satisfactory figures for many years.
As of March 20th, the credit growth of the entire banking system was only 0.68 percent compared to 2019. Roughly calculating, in the first 80 days of the year, the whole system only disbursed an addition of about 55.7 trillion dong of credit to the economy, equivalent to less than 700 billion dong a day.
This is the lowest credit growth in the past half-decade of the banking system, due to a direct reason that businesses are facing difficulties from the Covid-19 pandemic. In the 2016 2019 period, the lowest Q1 credit growth was recorded in 2016 at 1.54%, more than double the growth in 2020.
Meanwhile, the M2 as of March 20th increased by 1.55 percent compared to the beginning of the year. Although it is less than the same period of 2019 (2.54%), the absolute increase in Q1 was nearly 163.9 trillion dong.
Thus, the banking system was supplemented about 108 trillion dong of liquidity in less than three months of 2020. The higher growth of total means of payment (M2) than credit and the continuous capital withdrawal of the State Bank of Vietnam (SBV) are signs showing that the banking system is having significantly large amount of abundant capital.
As of March 20th, the operator net withdrew more than 147 trillion dong from the market via bill channel. Meanwhile, the Open Market Operation (OO) channel continued to record no new issuance and no maturity.
Bao Viet Securities Company (BVSC) explained that this move also came from the poor credit growth in the early months of the year.
According to Saigon Securities Incorporation (SSI) Research, the capital withdrawal trend of the SBV has started from the week close to the Lunar New Year holidays. In particular, the treasury bill balance by the end of February reached up to 120 trillion dong, the highest since July 2018 to date.
The system’s capital abundancy led to the continuous reduction of deposit and lending interest rates of banks since the beginning of the year.
Excluding the factor that the SBV lowered operating interest rates and deposit cap for terms of less than six months from mid-March, in the previous two months, banks’ deposit rates decreased significantly compared to the end of 2019.
BVSC’s report published in late February showed that the 12-month deposit rate of banks all tended to decline in February. In particular, the rates of four big state-owned banks dropped by an average of 0.1%, while that of banks with charter capital of more than five trillion dong fell by 0.07 percent per annum, and off banks with charter capital of less than five trillion dong decreased by 0.01%.
After the SBV lowered operating rates and deposit rate ceiling for terms of less than six months on March 17th, many banks have continued to sharply lower their deposit rates even on long terms. All the deposit rates for terms of less than six months at four big state-owned banks are lower than the beginning of the year, reaching 4.3 percent per annum for term of one month, 4.74 percent per annum for terms from one to three months.
Numerous banks such as Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Saigon Hanoi Commercial Joint Stock Bank (SHB), Asia Commercial Joint Stock Bank (ACB), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Vietnam Prosperity Commercial Joint Stock Bank (VPBank), etc. all lowered their deposit rates by 0.3 0.5 percent across the terms.
In addition to cutting deposit rates, banks have also lowered lending rates with many promotional credit packages. With this move, banks are seeking to regulate the amount of capital inflows from capital mobilisation activities and increasing credit outflows by reducing lending rates.
However, in the context of the complicated pandemic, the stalled production activities make it difficult for the market to absorb bank capital.
Nguyen Quoc Hung, director of the SBV Credit Department admitted that banks are not short of money. However, the pandemic has affected many sectors and the capital demand. In the first two months of the year, the credit growth of the system was very low, which means that its is very difficult to lend money at this time.
At the 2020 annual general meeting, Phan Duc Tu, Chair of the Board of directors of Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), also said that in the first two months of the year, the outstanding credit of banks even fell by nearly two percent. In particular, this downturn is due to seasonal factor and the strong influence of the Covid-19 outbreak from both supply and demand.
Although no credit growth numbers from the beginning of the year have not been disclosed, many leaders of large banks also said that the credit growth in the first months of 2020 did not meet the previous plan due to the impact of Covid-19.
