Deposit rates may increase slightly again?

2 min read

In the early days of July, a number of state-owned banks decided to lower deposit rates and adjusted them simultaneously for commercial banks with a common reduction of 20-30%, some banks cut down and down by 50 percentage points despite the absence of a new instruction of the State Bank (SBV) on the operating interest rate.

The fact that the whole system lowered the mobilizing interest rate unexpectedly when there was no general order of the State Bank was explained by the strong liquidity of the State Bank.

Specifically, the output capital was clogged by credit growth in the first 6 months of the year under the influence of Covid-19 epidemic (as of June 19, the credit increased by only 2.45%, much lower than the same period is from 6.22%). Since April, there has been a large amount of SBV bills maturing, which means the SBV has pumped the system about VND 150 trillion.

Therefore, interbank interest rate in June dropped to nearly 0% while cash flow shifted to Government bond investment, helping the State Treasury’s issuance of government bonds in June biggest in 1 year.

The strong demand for government bonds was also indicated by the bidding volume in June always maintained at 3 times higher than the bidding volume.

According to experts from KBSV Securities, this move also helps banks reduce capital costs to support revenue, while also protecting the net profit margin (NIM) from a sharp decline when The lending interest rates are under downward pressure to support customers to overcome difficulties caused by the Covid-19 epidemic.

The trend of mobilizing interest rates in the coming time will depend on two main factors: credit growth in the last 6 months and the schedule to tighten the rate of short mobilization for medium and long-term loans taking effect. October 2020.

In the base case, experts believe that deposit rates will still increase slightly in the remaining 6 months of 2020 when credit growth is expected to recover, business activities are gradually recovering after. Translation as well as lending interest rates are low.

In addition, the tightening schedule of short-term mobilization rates for medium and long-term loans, effective in October 2020, will likely increase the level of deposit competitiveness and reverse the trend of declining interest rates. .

However, according to the opinion of experts, the credit demand of the economy will be hard to recover to the normal state as before the epidemic took place, while the risk appetite of large banks somewhat more cautious, reflected in the business plans announced in the recent AGM season.

Thereby, the credit growth forecast for this year is lowered to around 10%, compared to the previous forecast of 13%.