Expecting a wave of interest rate cuts to support enterprises


HDBank has announced it would reduce lending interest rates by up to 3.5% per year.
HDBank has announced it would reduce lending interest rates by up to 3.5% per year.

Recently, Vietcombank has announced it will reduce lending interest rates with a reduction of up to 1% per year for loans in VND for existing corporate and individual customers, with the implementation period from November 1 to the end of December, 31.

On November 28, HDBank also announced a reduction in lending interest rates of up to 3.5% per year for individual and corporate customers in different industry groups, with an interest rate reduction of up to VND 120 billion, the implementation period is from November 1 to December 31. According to calculations, there will be more than 43,000 individual and corporate customers across the country with 55,000 loans that will receive interest rate reductions of up to VND 120 billion.

Banks said that the policy was applied to the following fields: import and export, in export processing zones, industrial parks, agriculture, transportation, small and medium enterprises, micro-enterprises; manufacturing and processing industry; At the same time, banks said that the interest rate reduction policy did not apply to securities loans, real estate business loans, mortgage loans of valuable papers.

This move to reduce lending interest rates is expected by the market to create a wave of lowering lending rates to support enterprises to overcome current difficulties, contributing to the recovery and development of the economy.

According to economist Dr. Dinh The Hien, lending interest rates by the end of the first quarter of 2023 would cool down to about 10-14%. At the same time, this expert said that the commercial banking system would be stabilized by the fourth quarter of 2022, and the corporate bond system and the real estate market would be stabilized by the first quarter of 2023. With that foundation, by the second quarter of 2023 the financial, trade and service system would be stable, and capital flow would return to normal for manufacturing enterprises.

Previously, reporting on interest rate movements of credit institutions for customers in October 2022, the State Bank of Vietnam informed the average lending interest rate of domestic commercial banks for new and old outstanding loans at 8.4-9.9% per year. The average short-term lending interest rate in VND for priority sectors was about 4.6% per year, lower than the maximum short-term lending rate prescribed by the State Bank (5.5% per year).

Meanwhile, the average USD lending interest rate of domestic commercial banks for new and old outstanding loans was at 3.2-4.5% per year for short-term; 5.2-5.7% per year for medium and long term.

Pressure from deposit-credit gap

However, from the end of September until now, deposit interest rates have been continuously on an uptrend. Up to now, the interest rates for terms over 6 months at joint stock commercial banks have been pushed to the range of 8.5-9.5% per year and have not taken into account the additional promotion rates for large-value deposits.

According to experts of SSI Securities Company, in general, deposit interest rates have increased by 350-400 basis points compared to the end of 2021 for terms of more than 6 months and this level has also been higher than period before the Covid-19 pandemic.

This increase in deposit rates has raised many concerns about the corresponding increase in lending rates, helping banks to ensure profit margins. As reflected by enterprises, if they do not receive incentives, they are having to borrow at an average interest rate of 12-14% per year, or even more, but they are still having difficulty accessing capital due to the growth limit (room) of credit.

There has been no improvement in deposit-credit gap in recent years.
There has been no improvement in the deposit-credit gap in recent years.

SSI’s report said that the pressure on market interest rates was still quite high when the latest data on credit growth and deposits from the SBV had not yet shown a significant improvement in the deposit–credit gap in the economy.

According to the latest data on the growth of total means of payment and customer deposits at the system of credit institutions of the State Bank, updated by the end of September 2022, the total means of payment reached more than VND 13,8 quadrillion, an increase of 3.21% compared to the end of 2021.

In which, the total deposit size of economic organizations was more than VND 5.78 quadrillion, an increase of only 2.43% compared to the end of 2021. This increase has not yet compensated for the decrease of more than VND 170,000 billion in the previous 2 months. Meanwhile, the size of deposits of people at credit institutions was at nearly VND 5.64 quadrillion, up 6.38% compared to the end of 2021.

But also according to the State Bank, by the end of October 2022, credit growth of the whole system had reached 11.5% compared to the end of 2021.

However, according to SSI, the increase in lending interest rates was slower partly, or even reduced, in order to implement the policy of the National Assembly, the Government and the direction of the State Bank of Vietnam on implementing solutions to promote recovery and economic development.


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