Trang Chủ
The pledge was given after the central bank announced the lending and depositing rate reduction starting Monday.
It coincided with the speech given by SBV governor Nguyen Van Binh at a recent meeting session of the National Assembly, stating that this will be the last rate cut for 2012.
This is the fourth time in nearly three months that the SBV has cut the depositing rates, with a total reduction of up to 5 percent.
The current interest rate mechanisms have ensured a balance between the interests of depositors and borrowers, in the context that inflation tends to be lower, SBV deputy governor Le Minh Hung told newswire Vnexpress.
Since the central bank will keep the interest rates stable until the end of the year, businesses will be more proactive in mapping out their business plans, Hung said.
As a result, there will be no financial shocks to the business sector, and the central bank can prevent forex speculators from hedging on the forex rate fluctuations, he added.
According to Hung, the current interest rate is appropriate regarding the world economic situation, notably the shrinking global demand, which will have an adverse impact on export-led economies like Vietnam.
Therefore, the operating activities of the SBV must be balanced between soaring local production and ensuring compliance with the inflation target, which is expected to be 7-8 percent this year.
With such an inflation forecast, the current depositing rate will ensure positive real interest rates for depositors. In addition, the State Bank is committed to not devaluing the dong by over 3 percent this year.
Interbank interest rates surge
The interbank interest rates have begun to pick up right after the deposit interest rate cap was lowered to 9 percent per year, from Monday (June 11, 2012), according to newswire Vneconomy.
The interest rates in the interbank market on the date of the implementation of the new deposit interest rate cap of 9 percent per year, and 1 percent reduction on other key rates, soared sharply in many terms.
Specifically, many transactions showed that the overnight interest rate was 3 percent per year, up from 1.5 percent per year last weekend; one-week terms were at 3.5 percent per year, up from 1.5 percent per year; and one-month terms were 5-5.5 percent per year, up from 4-4.5 percent per year, according to Reuters.
At the same time, on June 11, the State Bank of Vietnam (SBV) also lowered the interest rate on open market operations (OMO) to 10 percent per year, the lowest since January 5, 2011.
Currently, the interest rates on OMO no longer attract the attention of the market, as OMO transactions have very small value and, oftentimes there are no transactions for many days.
Also on OMO, the central bank maintained its issuing of treasury-bills for tenors of 28-days, 91-days and 182-days, with value of three trillion dong per week.
The current value of these T-bills has reached over VND70 trillion, and they have not matured yet. This amount of money will return to commercial banks in the next several months, according to Reuters’ data.
Further rate cut?
The Hong Kong and Shang Hai Banking Limited Group (HSBC) has said in a recently released report that with easing inflation pressure, the central bank will further cut interest rates by 2 percent in the coming months.
Meanwhile Le Anh Tuan, research director of Dragon Capital, told Vneconomy that: "I do not exclude the possibility that Vietnam will have to reduce interest rates by around 2-3 percentage points from now to the year-end"
In the May report sent to investors which was announced by Bao Viet Securities Co (BVSC) today, the company has also forecast that the SBV may have to cut rates once more in the remaining months of 2012.
Banks increase lending
Commercial banks will cautiously attempt to increase lending in the second half of the year while trying to avoid incurring further bad debts, industry leaders have said.
Despite a slowdown in credit growth in the opening months of the year, most major banks continued to post comfortable profits for the period.
In a recent response to a National Assembly deputy's query, State Bank of Viet Nam Governor Nguyen Van Binh said the nation's lending had been showing signs of rallying since March. However, banking industry insiders continue to see difficulties facing credit operations, the major source of profits for banks.
National Advisory Committee for Financial and Monetary Policies member Tran Hoang Ngan attributed declines in lending this year to moves by many banks to accelerate lending figures at the end of last year to meet credit growth quotas. This caused the bad debt levels of many banks to increase and hindered them from extending new loans, Ngan said.
DongA Bank general director Tran Phuong Binh said that banks were expecting the credit picture to improve in the second half of the year, so that they would be able to meet ambitious profit targets for this year, which include VND6.5 trillion (US$312.5 million) in profits for Vietcombank, VND5.5 trillion ($264.42 million) for Asia Commercial Bank, and VND4.6 trillion ($221.15 million) for Eximbank.
Profits from lending represented about 70 per cent of DongA's total pre-tax profits, Binh noted, but he also said that banks would not try to boost credit growth at any cost in the face of the current bad debt situation.
Eximbank chairman Pham Trung Cang said his bank was selecting borrowers very carefully to avoid the risk of increased bad debt levels – even though the bank had substantial disposable capital on hand.
"We have slashed interest rates to levels even lower than the ceiling rates, but it's not easy to lend," Cang said. "It's very hard to find good clients to whom to lend money at the present time."
Eximbank reported on its website that it had reached a profit of about VND1.47 trillion ($70.77 million) in the first quarter of this year, up 48 per cent over the same period last year. Lending grew by 2.4 per cent in May after slumping by 5 per cent in the first four months of the year.
Vietcombank posted a pre-tax profit of VND1.35 trillion ($64.7 million) in the first quarter. Bad debts rose to 2.87 per cent by the end of March, however, requiring the bank to establish a provisionary fund of VND950 billion ($45.7 million) to cover credit risks, its financial report showed.
Among other leading banks, HDBank posted a profit of VND140 billion ($6.7 million) in the first quarter, despite a 5-per-cent decline in lending during the period. According to the publication Dau tu Chung khoan (Securities Investment), Asia Commercial Bank posted a VND1.1 trillion ($52.38 million) profit for the quarter, while DongA Bank saw a profit of VND500 billion ($23.8 million) in the first four months of the year and Sacombank tolled a pre-tax profit of VND1.6 trillion ($46 million) in the first five months. Many banking industry leaders said the high profit figures were still low for major banks with trillions of dong in equity.
