In the strategic report, BIDV Securities Company (BSC) mentioned that the State Bank of Vietnam (SBV) offered low credit growth limits in the context of declining credit demand. The agency granted about 10.1 percent credit growth limit to banks and credit institutions in 2020, much lower than the 13 percent set at the beginning of the year, due to the impact of the Covid-19 epidemic.
According to BSC, the SBV is setting lower credit growth target compared to credit demand (estimated at 10.5%), and will increase credit growth room depending on the situation of macroeconomic fluctuations in order to support the economy. BSC also said that the remaining credit growth room may be granted at the end of the year if inflation is well controlled.
In Q1 2020, the SBV lowered operating interest rates to support capital costs and increased deposit interest rates at the SBV in the system.
The reduction of deposit interest rates would help banks save capital costs. BSC estimated that this would help the entire banking sector to save 4.454 trillion dong, including Asia Commercial Joint Stock Bank (ACB, 479 billion dong), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV, 682 billion dong), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank, 746 billion dong), etc.
Meanwhile, lowering lending interest rates for priority sectors will not have much impact on banks because the lending rates for priority sectors at banks are lower than the ceiling level.
On the other hand, the move to increase the interest rate of compulsory reserve deposits by 20 basis points will help banks have an additional interest income, though not much. BSC stated that the compulsory reserve deposits of banks at SBV as of late 2019 were 175.3 trillion dong, thereby estimating that the additional interest income would be around 351 billion dong.
