Banks push cheap loans into market as savings rates drop

In the context of negative credit growth during the first two months of 2024, savings interest rates on the market continue to plummet. Many banks are injecting cheap capital into the market to boost credit demand.

Illustrative image (Photo: SGGP)

Excess liquidity, decreasing interest rates

Since the beginning of March 2024, nearly 20 commercial banks in the market have continued to adjust savings interest rates downward despite the rate-cutting trend that began in March 2023. Accordingly, these banks have reduced savings interest rates for various terms, with the highest reduction being up to 1.1 percent. Specifically, last week, Sacombank lowered the interest rate for 4-5 month terms by 0.7-1.1 percent per annum to only 2.5 percent per annum. Currently, Sacombank's highest interest rate for a 36-month term has also decreased by 1 percent to 5 percent per annum.

SeABank also made reductions ranging from 0.2 to 0.5 percent across terms, with the highest rate at 4.6 percent per annum for 18 - 36 month terms and the lowest at 2.7 percent per annum for 1-2 month terms. The 12-month term now stands at only 3.75 percent per annum. ABBank has similarly decreased rates by 0.1-0.2 percent for some terms, resulting in the highest interest rate of 4.6 percent per annum for the 6-month term and 4.5 percent for 9-12 month terms.

In addition to private commercial banks, the large State-owned banks (Big 4), namely Agribank, Vietcombank, Vietinbank, and BIDV, have also offered relatively low deposit interest rates compared to the market average. Recently, they have reduced deposit rates further by 0.1 - 0.2 percent across all terms. Currently, the interest rate for 1-2 month terms at these banks is only 1.7 percent per annum, and for terms over 12 months, it is below 5 percent, ranging from 4.7 percent to 4.8 percent per annum.

Currently, deposit interest rates at private commercial banks no longer surpass 6 percent per annum, and at the Big 4 State-owned banks, rates no longer exceed 5 percent per annum. Consequently, the deposit interest rate landscape has dropped by 50 percent compared to the same period in 2023, and it is expected to persist at historically low levels until at least mid-year.

According to data from the State Bank of Vietnam (SBV), as of the end of February 2024, the total credit outstanding of the entire system decreased by 0.72 percent compared to the end of 2023. The surplus liquidity in the system is demonstrated further by the SBV's recent move to withdraw funds from the market through treasury bill issuance starting from March 11, after more than four months of suspension. As of March 25, the SBV has withdrawn nearly VND152 trillion from the banking system through treasury bill issuance without any corresponding injection.

Attractive loan rates to stimulate economic growth

In light of the ongoing decline in deposit interest rates, numerous commercial banks are introducing enticing lending rates, sometimes lowering short-term loan rates to 3 percent per annum, even below deposit rates, to inject capital into the economy.

For instance, from March 21 to 31, 2024, Sacombank launched a capital injection of VND10 trillion with an interest rate of merely 3 percent per annum to cater to the borrowing demands of both individual and corporate clients in the latter part of the first quarter of 2024. This interest rate is applicable to loans with a 3-month term, disbursed by the end of March 2024. Designed for customers seeking short-term production and business financing, the loan application process will receive priority, ensuring swift and timely processing.

Recently, SHB has also lowered lending rates across the board, offering rates as low as 5.79 percent per annum for medium to long-term loans for individual customers. Moreover, SHB has injected an additional VND5 trillion into its lending program, increasing it to VND23 trillion, aimed at helping people bolster reserves for goods, support production and business activities, and prepare funds for purchases, payments, and expenses. For corporate clients, SHB has introduced a credit program of VND10 trillion for businesses engaged in production and business activities, with reduced interest rates starting from 5.8 percent per annum. Additionally, the VND1-trillion credit package for enterprises seeking loans to purchase vehicles offers preferential rates starting from 6.5 percent per annum. These attractive loan offers by SHB are applicable to new loans for both individual and corporate customers until December 31, 2024.

Besides offering attractive loan packages, ABBank also tailors financial solutions for specific industries to support businesses in reducing capital costs and effectively managing cash flows. Specifically, for manufacturing and trading enterprises in the pharmaceutical and medical equipment industries, this bank will provide credit limits without collateral requirements, funding up to 90 percent of the economic contract value, with a loan-to-asset ratio being debt collection rights of up to 85 percent. Additionally, clients receive support for up to 50 percent of international payment fees, domestic guarantee fees/financial arrangement fees, and favorable exchange rates. For construction contractors, machinery and equipment installers, and suppliers of raw materials, machinery, and equipment for bidding packages and projects financed by state and ODA funds, ABBank provides financing with up to 100 percent guarantee using debt collection rights as collateral. The loan-to-value ratio for other secured assets can reach up to 99 percent of their value, with reduced deposit requirements for LC issuance, priority guarantee incentives, and no deposit required for warranty and bid guarantees.

In addition to offering preferential interest rate packages, many commercial banks have now publicly announced lending rates to expand their customer base, thereby contributing to credit growth. Specifically, BIDV disclosed an average lending rate for March around 6.49 percent per annum. Meanwhile, Sacombank offers lending rates of 4.2 percent per annum for short-term loans with a term of 1-3 months, 5.6 percent per annum for 4-6 month terms, 7.7 percent per annum for 10-12 month terms, and 8.5 percent per annum for medium to long-term loans.

Mr. Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam (SBV) - Ho Chi Minh City branch, stated that in accordance with the Prime Minister's directive and SBV's guidance, credit institutions in Ho Chi Minh City have been actively implementing measures to expand credit and support business activities. This includes continuing to support enterprises in terms of interest rates through two fundamental activities: disbursing preferential credit packages and implementing preferential credit programs initiated by the Government, SBV, and Ho Chi Minh City People's Committee, as well as adjusting lending rates for enterprises in line with the downward trend in deposit interest rates. Furthermore, efforts are made to reduce costs and enhance operational efficiency through technology innovation and administrative reforms, thereby reducing input costs and ensuring sustainable lending rate reductions.

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