Good interest rates, businesses are "pampered"

Deposit interest rates have increased slightly, but lending interest rates are unlikely to increase as the banking industry strives to boost credit growth at the end of the year.

The Prime Minister has just issued Official Dispatch No. 122/CD-TTg to the Governor of the State Bank of Vietnam (SBV) on strengthening credit management solutions in 2024. In particular, focusing on efforts to reduce lending interest rates through cost reduction, simplifying administrative procedures, enhancing the application of information technology, and digital transformation.

There is hardly a race to increase deposit interest rates.

Immediately after the Prime Minister's telegram, the State Bank of Vietnam issued Official Dispatch No. 9774 requesting credit institutions and State Bank branches in provinces and cities to seriously implement measures to stabilize deposit interest rates and reduce lending interest rates. In addition, it is necessary to continue to resolutely and effectively implement solutions, simplify lending procedures, increase the application of information technology and digital transformation in lending processes...

In the market, according to the reporter of Nguoi Lao Dong Newspaper, the trend of increasing deposit interest rates continued to increase in November 2024, but the increase was not much.

Southeast Asia Bank (SeABank) is the latest name to adjust the deposit interest rate table, increasing quite strongly in some terms. Customers depositing for a term of 1-2 months, the interest rate is 3.4%/year; for a term of 3-5 months, the interest rate is 4.1%/year. The highest interest rate at this bank is 5.45% for a term of 18 months or more.

In the last months of 2024, it is unlikely that there will be a race to increase deposit interest rates. Photo: TAN THANH

Currently, interest rates above 6%/year also appear at many commercial banks.

Mr. Truong Dac Nguyen, Head of Analysis Department, WiGroup Data Solutions Company, explained that at the end of the year, enterprises boost production and business, leading to increased demand for loans, forcing banks to compete to attract capital by increasing deposit interest rates.

"This is not a phenomenon unique to this year but has been observed in previous years. This shows seasonality. However, the interest rate level remains low and this adjustment will not last long, not causing a reversal in the interest rate trend," Mr. Nguyen commented.

Economist - Dr. Dinh The Hien said that the mobilization interest rate level has been brought down to 4.5% - 5%/year recently, which is reasonable, as a safe investment channel and still has a positive real interest rate compared to inflation. Recently, the increase in input interest rates has mainly focused on some small and medium-sized banks, possibly to meet some individual capital needs, not the general picture of the market.

"Therefore, it is difficult to have a race to increase input interest rates, especially after the Government and the State Bank of Vietnam have made adjustments and required credit institutions to have solutions to keep interest rates low, especially in the context of inflation being controlled at a low level," said Dr. Dinh The Hien.

Need to pump 670,000 billion VND into the market

Statistics from the State Bank of Vietnam show that the total outstanding credit balance of the entire system by the end of September 2024 reached VND14.7 million billion, far exceeding the total mobilized capital of VND14.5 million billion. This development puts pressure on liquidity, forcing major banks to adjust their interest rate policies to meet the economy's increasing capital demand.

By the end of October 2024, the banking system's credit growth for the economy was more than 10.08%. If calculated by the total outstanding credit balance by the end of August 2024, it was more than 14,561 trillion VND. To achieve a credit growth rate of 15% for the whole year, in the last 2 months of the year, it is necessary to pump into the market approximately 670,000 billion VND.

In the context of a large loan limit, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) continues to promote the implementation of credit packages with a total scale of up to more than 19,000 billion VND.

Specifically, BIDV has set aside VND3,000 billion and USD50 million to provide preferential capital packages for textile and garment enterprises with new investment projects/projects to renovate and upgrade works, factories, machinery and equipment towards efficient energy use, minimizing environmental pollution or plans to implement export orders that meet green criteria of markets (Europe, America, Japan...).

For businesses investing in clean water projects, BIDV has set aside VND5,000 billion for loans, and has also committed to reducing interest rates by up to 1.5 percentage points compared to the bank's lending floor.

Loan interest rates will be competitive

According to a leader of the Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), since the beginning of November 2024, thanks to the strong implementation of public investment projects, enterprises participating in the implementation of these projects have increased their demand for loans and are almost indifferent to the cost of borrowing because lending interest rates have almost hit rock bottom.

However, banks can still reduce interest rates for businesses that operate effectively. Because currently, because the credit limit has not been fully used, all banks want to increase outstanding loans, leading to fierce competition.

Recognizing this, Dr. Dinh The Hien said that lending interest rates are in strong competition among banks in finding customers, especially good customers. Therefore, it will be difficult to simultaneously increase interest rates at the end of the year.

"Many businesses are in good health, doing business stably, and have loans with interest rates of only 7%/year and vice versa, businesses that are not doing well and have access to credit will have much higher interest rates. This is a competitive problem that requires borrowers to meet all conditions, not just one-way pressure to reduce interest rates from banks" - Dr. Hien analyzed.

The director of an agricultural products trading company in the Mekong Delta informed that the interest rate for agricultural product export has never been as low as it is now, but his company is still considering whether to borrow or not because he is afraid of inefficiency, preferring to "lie still" to preserve capital. He said that his company has a good credit history, so short-term loans in VND only have an interest rate of 2.7%/year, and loans in USD are 3.2%/year. "We have never been supported by banks like now to help them meet their year-end credit targets like now. Companies that find it difficult to borrow may be due to lack of collateral or risky loans," said the director of this company.

The bank is profitable

Currently, at the Vietnam Bank for Agriculture and Rural Development (Agribank), the average deposit interest rate is 3.64%/year plus related costs, leading to an average capital mobilization cost of up to 5.12%/year. Meanwhile, the average lending interest rate is 6.8%/year. Therefore, the average difference between capital mobilization cost and lending interest rate is quite low -1.68%/year.

Similarly, at Asia Commercial Joint Stock Bank (ACB), the average lending interest rate is 6.67%/year, the difference between the deposit interest rate and the average lending interest rate is 2.56%/year, resulting in an average deposit interest rate of 4.11%/year.

A senior leader of VietinBank said that except for Agribank - a 100% state-owned bank, the remaining commercial banks with a difference between lending interest rates and capital mobilization costs of 2% or more are profitable.

Mr. Lam Ngoc Tuan, Director of Tuan Ngoc Agricultural Cooperative (HCMC):

Need to extend loan, reduce interest rate further

Tuan Ngoc Agricultural Cooperative is borrowing at a commercial rate of 10% and using the assets of its members as collateral. Currently, the Cooperative needs to build more processing and post-harvest preservation areas but cannot borrow capital because it has no assets to mortgage. Therefore, the Cooperative can only "survive" and not develop.

Although the cooperative has received preferential loans from the Farmers' Support Fund under the Ho Chi Minh City Farmers' Association, the loans are small and not enough to meet the demand.

After the COVID-19 pandemic, cooperatives in Ho Chi Minh City are facing many difficulties and are looking forward to extended support for recovery, such as loan extensions and interest rate reductions.

Mr. Lu Nguyen Xuan Vu, Chairman of Saigon Business Club, General Director of Xuan Nguyen Group Corporation:

Always need more capital

The fourth quarter is the time when businesses need to buy goods; in addition, there are salaries and bonuses and many other expenses that need to be settled. Therefore, most businesses, especially small and medium-sized businesses, private businesses... need additional capital.

Recently, many banks have proactively reduced interest rates and have good interest rate support packages for businesses, although they are still very cautious in lending. The general interest rate for mobile loans is 6%-8%, compared to before, there has been an adjustment to reduce interest rates. However, current economic growth is still slow, businesses find it difficult to predict the purchasing power of the market, so the general mentality is not bold enough to invest in production at a high level but only at a safe level. Businesses are afraid of inventory, the cash flow turnover is not enough to pay off bank debts.

Ngoc Anh - Thanh Nhan take note

Source: https://nld.com.vn/lai-suat-tot-doanh-nghiep-duoc-o-be-196241128205503043.htm