(DTCK) Talking with Securities Investment, Nguyen Quoc Hung, director of Credit Department of Economic sectors, the State Bank of Vietnam (SBV) said, credit growth had risen again by nearly four percent recently.
In response to the Covid-19 epidemic, SBV decided to lower the operating rate twice in succession in March and May with a total reduction of 100 percentage points for the refinancing rate, as well as to lower ceiling cap on short-term deposit rates and lending rates in priority areas.
The efforts of commercial banks to compensate for the reduction of lending interest rates to support customers affected in the Covid-19 epidemic had recently lowered the deposit rates for long-term deposits over six months sharply in Q2/2020 to reduce capital costs.
Long-term deposit interest rates over six months had dropped by about 50 basis points since the beginning of the year at most commercial banks in the context that the liquidity in the system had maintained abundant status.
For example, Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) ‘s interest rates reduced for all deposit terms, in which one-to-five-month terms decreased by 0.3 percentage points, and six-to-12-month terms simultaneously decreased to 0.7 percentage points.
The savings interest rate usually listed at the counter after reducing fluctuated within 3.5 percent to 6.5 percent per year, applying terms from one month to 36 months.
Also, the average savings interest rate at the highest counter at VPBank in July was 6.5 percent per annum, applied when customers had deposits of 50 billion dong or more at 24 months and 36 months.
The savings interest rate for over 12 months of state-owned banks was popular at six percent per year. Notably, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) had reduced the interest rate for 36-month term deposits to 5.8 percent per year, which was the lowest in the market and a record low level of long-term deposits in recent years.
Deposit rates fell, lending rates along with the downward trend to support the economy and interest rates had stood at the lowest level in the past 10 years, said Hoang Minh Hoan, deputy general director of Sai Gon Joint Stock Commercial Bank (SCB).
Indeed, at the forefront, state-owned commercial banks had reduced lending rates to the lowest in the market.
Specifically, Vietnam Bank for Agriculture and Rural Development (Agribank) announced a further decrease of 0.2 percent per year for lending interest rates in priority areas, bringing the maximum short-term lending interest rate to 4.8 percent per year. The medium and long-term loan interest rate was at least 7.5 percent per year, which was the lowest interest rate in the market today.
That was the third time since the beginning of the year, Agribank had reduced lending rates for priority areas.
Similarly, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) continued to reduce the lending interest rate by 0.5 percent per year compared to the current interest rate. This was also the third time since the beginning of the year that BIDV had reduced lending rates to support businesses to access affordable loans in the problematic context to promote economic growth.
According to SSI Securities Corporation (SSI), over the past time, the deposit growth had been higher than outstanding loans, causing commercial banks to had excess domestic currency and adjusted to reduce deposit interest rates.
However, after this reduction, it was likely that deposit interest rates would move sideways because the decrease in deposit interest rates from one percent to two percent per year was nearly equal to the reduction of lending interest rates. More importantly, it was expected that credit growth would improve due to the recovery of economic activities, trade and the disbursement of public investment.
Talking to Securities Investment Newspaper, the general director of a joint-stock commercial bank underestimated the possibility that SBV would lower operating rates again in the second half of 2020 because the domestic economic activity had gradually recovered.
In particular, inflationary pressures were showing signs of increasing due to unpredictable movements of pork prices, although petrol and public service prices were favourable factors to curb inflation.
A study by KB Securities Vietnam Joint Stock Company (KBSV) stated that the trend of mobilising interest rates in the near future would depend on three main factors, including credit growth in the last six months; management policies of SBV; and tightening short-term mobilisation ratio for medium and long-term loans, effective from October 2020.
Results of a survey on business trends of credit institutions in Q3/2020 of the Forecasting Department, SBV, said that in Q3, customers’ demand for using products, services at credit institutions were expected to increase again (58.1 percent of credit institutions expected).
In particular, the demand for loans might grow higher (59.2 percent of credit institutions expected to ‘increase’ (6.8 percent of credit institutions expected to ‘strong increase’) compared to the level of 53,5 percent of the previous period.
Rapid credit growth would put pressure on capital mobilisation for banks, boosting interest rates. Interest was the price of capital as the demand for capital increases would inevitably push interest rates up, Nguyen Tri Hieu, an economist, shared with Securities Investment Newspaper.
In this context, pressure on capital mobilisation also existed under Circular No.22/2019/TT-NHNN effective from January 1, 2020. However, in October 2020, the adjustment to reduce the ratio of short-term capital for medium and long-term loans would start from the current 40 percent to 37%.
Frequently, joint-stock commercial banks strengthened and supplemented their charter capital by raising capital from domestic and foreign shareholders, issuing stocks to raise money on the stock market or issuing bonds.
As for state-owned commercial banks or joint-venture commercial banks, it was possible to increase its capital by providing additional capital from the government or contributing capital from joint-venture parties.
Besides, the own capital of commercial banks was also supplemented from the business results of the bank through the appropriation of reserve funds and several other funds.
However, in the period when the world economy was facing difficulties, especially forecasted by the end of the Covid-19 pandemic, raising capital from foreign investors and on the stock market was impossible.
Not to mention, currently, the capital mobilisation activities of banks were also facing fierce competition by bond channels with much higher interest rates. The rising gold price was also sharing a part of cash flow from residents flowing into banks.
In the base case scenario, the deposit rate was expected to increase slightly in the second half of 2020 when credit growth seemed to recover, and the roadmap to tighten short mobilisation rates for medium and long-term loans would take effect in October 2020. These might likely increase the level of deposit competition and reverse the trend of declining interest rates.
The adjustment would to increase only slightly by 30 percentage points to 50 percentage points as there was still a possibility that SBV would lower interest rates once again (in the context that inflation might cool down in the second half of the year thanks to high price levels in the last two quarters of 2019), KBSV forecasted.
