With Vietnam’s economic indicators showing steady growth, commercial banks here forecast decline in lending interest rates in upcoming months.
After Vietnam Banking Association called member banks for reducing deposit and loan rates two weeks ago, commercial banks have begun to cut down on promotion programmes such as giving gifts, money as well as reducing interest rates down to around 11.5 percent per year. It is a necessary condition for lending interest rates to drop in near future.
Pham Duy Hung, general director of VietA Bank, said that if the central bank continued support for state-run banks to reduce lending rates to 12 percent – 13 percent per year, joint stock banks will follow them to cut interest rates respectively, or select only customers who have high risks to loan at high interest rates.
Sharing Hung’s view, a leading banker said that in order to lower interest rates as expected, the central bank should support joint stock banks through the provision of cheap capital through open market operations (OMO) or reduce the compulsory reserve ratio for banks to cut input costs and then to lower loan interest rates.
Currently, most banks are raising deposits at average interest rates of 11.5 percent – 11.8 percent per year. Many banks have also added other promotion programmes to their deposit raising campaigns and their interest rates are ranging from 14.5 percent to 15 percent with joint stock banks and 13.5 percent – 14.5 percent for state-run banks.
However, at the regular meeting in April, the government issued a resolution to request State Bank of Vietnam to cut the average lending rate to 12 percent annually in near future.
Nguyen Tri Hieu, member of the management board of An Binh Bank (ABBank), said that the interest rate platform has decreased significantly compared with it a few months ago and ABBank as well as other banks all expected SBV to work out specific measures to help further lower interest rates. “However, it will take us a little longer to cut interest rates,” he said. “With an expected interest rate of 12 percent per year, inflation will be pushed down to 7 percent, plus amplitude of a positive real interest rate for depositors at about 2 percent and net profit margins for a bank at 3 percent. So, it is obvious that inflation must be brought down to 7 percent, thus it is difficult to cut interest rates immediately at the moment,” he added.
According to Hieu, inflation must be less than 10 percent to keep the growth rate of 6.5 percent. However, from now until the end of 2010, the targeted lending rate down to 12 percent could be achieved, provided that banks’ liquidity should be improved further, he said.
Currently, ABBank’s close customers are subject to lending interest rates at 13.5 percent – 14 percent per year, and it is forecast that in one – two months, the bank will reduce lending interest rates by 0.5 percent to 0.75 percent again.
Evaluating the criteria to reduce lending rates to 12 percent by the government, Tran Hoang Ngan, member of the national monetary policy advisory council said that this goal can be achieved, but it should take a little long time.
“SBV is extending the terms of loans through open market operations, while banks that have recently won a large amount of government bonds will have more opportunities to participate open market operations. Therefore, accessing ‘cheap’ capital for commercial banks will increase respectively,” he said.