Deposit interest rate decreased, creating momentum to reduce lending interest rates

21-Nov-2020 Intellasia | Thoi bao Ngan hang | 6:02 AM Print This Post

As of mid-November 2020, the wave of lowering deposit rates of domestic commercial banks has spread throughout the system. Many banks have sharply reduced interest rates on long term deposits over 12 months to less than six percent per year; while short terms of less than six months in some banks were around three percent per year, much lower than the ceiling regulated by the State Bank of Vietnam(SBV).

The record at Vietcombank shows that, up to last week, the credit institution’s 24-month deposit interest rate was 5.7 percent per year, 36-month term was 5.4 percent per year compared to the interest rate. October. At Agribank, the 12-month deposit rate is 5.9%. Meanwhile, at Techcombank, customers who have three billion dong savings with a term of less than six months interest rates are only 2.65-2.95 percent per year; 12-month term or more is only about 4.7-4.9 percent per year.

Compared to October, online savings interest rates at many other banks also had a strong adjustment. For example, online savings deposit (3-month term) at SCB, GPBank, VIB, VietCapitalBank is currently around 3-4.05%. 6-month term at CB and NCB is about 4-6.65%, while the highest 12-month term at NCB, SCB and Kienlongbank is currently only 7.1-7.3 percent per year.

The continuous decrease of deposit interest rates in recent months has, on the one hand, helped banks restructure mobilised capital sources; On the other hand, it creates a cheap source of capital, thereby creating room to further reduce lending interest rates to support people and businesses to restore production and business in the last months of the year.

There are many reasons for reducing deposit rates. First, the inflation is decelerating quite quickly, which has enabled banks to lower deposit rates deeper while still ensuring positive results to attract depositors. Second, the liquidity of the system is also very abundant due to slow credit growth. Abundant liquidity has caused interbank interest rates to fall deeply and stand at very low levels. Third, saving is still a safe investment channel and has a relatively attractive profitability for many people. The evidence is that although the deposit interest rate has decreased sharply compared to the beginning of the year, the capital flowing into the banking system through the savings channel still maintains a fairly good growth rate.

However, from the business perspective of commercial banks, increasing the flow of savings while credit output is difficult because the current weak credit demand is also a great pressure.

Create room to further reduce interest rates

As noted by the Banking Times, currently commercial banks have taken initiative in many positive and appropriate solutions to stimulate credit demand, including a deeper reduction of lending rates.

For example, Vietcombank has announced business loans to SMEs at 5.9 percent per year, which is equivalent to 12-month term deposits. Agribank also announced a further 0.3 percent reduction in lending interest rates for five priority areas. In which, short-term lending is only a maximum of 4.5 percent per year. Other commercial banks such as MB, HDBank, and VPBank also apply end of the year business and shopping loans with interest rates from 5.99 percent 6.8 percent per year. All these developments show that, it is likely that the wave of lowering lending rates for the production, business and consumption sectors will continue to spread and create vibrant competition in the remaining two months. of 2020.

Especially banks with large proportion of demand deposits such as Techcombank, Vietcombank, MB, MSB… have more opportunities to lower lending rates. Accordingly, in the past 10 months, the proportion of demand deposits of these banks reached from 22.6-37 percent of total customer deposits. Other banks such as ACB, VIB, LPB, OCB… this proportion is also at 10-18%.

This shows that the digital strategies, innovating payment utilities to attract low-interest deposits (0.1-0.2 percent per year) of banks are quite effective. This will be the basis for units to continue lowering lending rates for key credit packages although currently 5 groups of priority areas of lending interest rates are already close to the deposit interest rate of 4.5 percent (for short term).

In addition, banks also promote non-credit products and services to increase revenue to compensate for the decline from credit activities. Many banks’ Q3 financial statements recorded a fairly positive growth of non-credit business networks. For example, Techcombank, in the first nine months of the year, net profit from service activities of this bank reached nearly 3.12 trillion dong, up 65 percent over the same period last year. Or like VPBank, nine months’ net profit from services also increased by 20 percent over the same period, reaching 2.323 trillion dong… Increasing profit from services will also help banks reduce interest rates for borrowing while still ensuring the profit target for the whole year.


Category: Finance, Vietnam

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