Lending rates hardly see sharp fall at the end of the year

07-Dec-2021 Intellasia | Dau tu Online | 5:02 AM Print This Post

To meet the increasing capital needs during the peak business season at the end of the year, banks are promoting preferential capital to the market. However, there is not much room left to reduce interest rates.

The interest rate levels (both savings and lending rates) have significantly declined in recent time. Notably, the total accumulated amount of interest reduction from July 15th 2021 to October 31st 2021 of 16 banks which agreed to lower interest rates reached 15.559 trillion dong, equivalent to 75.48 percent of the commitment. This shows the efforts of banks in cutting interest rates for customers, despite the high pressure of provisioning for bad debts, particularly for the restructured loans due to the epidemic.

Dr Huynh Trung Minh, a financial expert said that to lower lending interest rates, banks must first cut their input costs as well as reduce operating costs. However, in Minh’s point of view, as the savings interest rates have fallen sharply in recent time and mobilisation of capital has declined, it is difficult for lending interest rates to deeply fall.

Statistics of the State Bank of Vietnam (SBV) showed that the total deposits in credit institutions by the end of September 2021 reached more than 10,500 trillion dong, up by nearly 5.3 percent over the beginning of the year. In particular, the deposits of economic organisations reached more than 5,200 trillion dong, up by 380.291 trillion dong, equivalent to an increase of 7.8 percent compared to the beginning of the year. Residential deposits only grew by 2.92 percent to nearly 5,300 trillion dong, equivalent to an increase of over 150 trillion dong compared to the beginning of the year. Particularly, in August and September 2021, residential deposits continuously fell compared to the previous months. Specifically, August 2021 recorded a decline of 986 billion dong and September 2021 recorded a decline of 1.473 trillion dong.

Limited available room

Under the pressure of inflation, the decreasing savings interest rates and the attractiveness of other investment channels including securities channel, the growth in deposits of banks is declining. Meanwhile, as customers’ capital demand is gradually recovering in the peak business season, banks have increased interest rates again to mobilise capital.

According to Dr Minh, if the 2021 inflation is controlled at three to four percent, with the current interest rate level, depositors still can enjoy positive real interest rates. However, as next year’s inflation pressure is increasing, while the stock market and real estate market remain attractive to attract idle money, savings is considered less attractive.

“Banks have almost implemented all possible solutions to support people and businesses and are difficult to further low interest rates. Thus, interest rate subsidy is probably the most appropriate solution at the moment. The issue is the need for a suitable implementation method,” said Dr Minh.

According to the Banking Industry Outlook 2021 recently published by Bank for Investment and Development Securities Joint Stock Company (BSC), with the expectation of economic recovery starting in the fourth quarter of 2021 after a period of good control of the epidemic, the credit demand will gradually increase again.

The basis for BSC to make the above statement is that many banks were granted more credit growth room in the last quarter of the year. The extended credit growth limit of Tien Phong Commercial Joint Stock Bank (TPBank) is the highest, reaching 23.4%; followed by Vietnam Technological Commercial Joint Stock Bank (Techcombank) with 22.1%, Maritime Commercial Joint Stock Bank (MSB) with 22 percent and Military Commercial Joint Stock Bank (MB) with 21%. Vietnam International Commercial Joint Stock Bank (VIB) and Vietnam Prosperity Commercial Joint Stock Bank (VPBank) are in the next group with credit growth limits of respectively 19.1 percent and 17.1%. In the group of state-owned banks, the credit growth limit was expanded to 15 percent for Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), 12 percent for BIDV and 12.5 percent for Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank).

In general, the credit limit in 2021 of banks was raised to 13.8%. According to BSC, the increase in credit growth room helps banks have more room to develop their lending in the peak season, in the context when many banks reached the credit ceiling in the first nine months of the year. Vietcombank’s credit growth after the first three months of 2021 was 11.5%, and that of TPBank was 15%.

BSC expected that the nationwide reopening from the beginning of the fourth quarter of 2021 will help corporate customers resume operation, leading to an increase in credit demand at the end of the year.

Speaking at the seminar “Leading the way to restore economic growth” held by Bao Dau tu on November 30th, Bui Thuy Hang, deputy director of the SBV’s Monetary Policy Department, as of November 25th, the outstanding credit of the entire economy has increased by 10.1 percent over the end of 2020. This number as of October 29th was only 8.72%.

However, financial analysts said that credit will only grow to a reasonable level. Dr Can Van Luc, a banking expert, said that this year’s credit growth of 10 13 percent is appropriate. The results of the credit trend surveys in the fourth quarter of 2021 by the SBV also pointed out that banks forecast that the credit balance will increase by four percent in the fourth quarter and by 12.3 percent throughout the whole year of 2021, lower than the expectation of 13.1 percent in the surveying period in the third quarter of 2021.


Category: Finance, Vietnam

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