Central bank eyes lower bank lending rates

January 23, 2017 - 10:06

The State Bank of Việt Nam revealed recently that it would continue to keep bank lending interest rates unchanged from last year’s levels.

The State Bank of Việt Nam revealed recently that it would continue to keep bank lending interest rates unchanged from last year’s levels. — Photo vneconomy.vn

By Thiên Lý

The State Bank of Việt Nam revealed recently that it would continue to keep bank lending interest rates unchanged from last year’s levels.

But analysts think this will be a very difficult task for the central bank since many factors are expected to impact the rates this year.

The first reason they mention is the imminent rise in the dollar after the US Federal Reserve increases interest rates an expected three times this year as economic growth and inflation pick up.

They say interest rates on the đồng always have a close correlation with the value of the greenback.

The second reason is that Circular No.06, which caps the ratio of short-term funds that can be used for medium- and long-term loans, will reduce it from 60 per cent to 50 per cent this year.

This has forced banks to restructure their finances and increase interest rates on medium- and long-term deposits.

The hike in wages this year is likely to bring inflationary pressure on the economy.      

In the event, some even predict lending interest rates to go up by 1-2 percentage points.

One of the measures the central bank is proposing is cutting deposit interest rates.

Many state-owned banks such as BIDV and Agribank have started to lower the rates on deposits of one to five months by 0.2-0.3 points. 

Other lenders have also reduced the deposit interest rates, though by a more modest 0.05-0.1 points.
Sacombank has cut the rates on deposits of two and three months by 0.1 point to 4.9 per cent and 5.2 per cent.

The Ministry of Planning and Investment seeks to push lending interest rates to under 5 per cent by 2020, but many analysts are sceptical about this too.  

They said the rates cannot be cut any further since current rates are rather low compared with the average deposit interest rates.

The interest rates are around 6-7 per cent for priority sectors for short-term loans and 9-10 per cent for medium- and long-term loans.

The rates for normal production and business activities are between 6.8 and 9 per cent for short-term loans and 9.3 per cent and 11 per cent for medium- and long-term loans.

Banks hike deposit rates for liquidity

Recently banks had cut deposit interest rates in response to the State Bank of Việt Nam’s appeal to support the economy.

However, during the run-up to Tết many of them have had to put up their rates again to sustain liquidity.

Sacombank has hiked the rates on two- and six-month deposits by 0.1 and 0.2 percentage points to 5 per cent and 5.9 per cent.

DongABank hiked the rates on one- and six-month deposits by 0.1 and 0.3 points to 5 per cent and 5.5 per cent.

Some other banks have also increased the rates by 0.1-0.3 points.

Besides, banks are also scrambling to launch lucrative promotion programmes to attract deposits.

Vietinbank is offering bonuses of nearly VNĐ8 billion to depositors, SHB has earmarked VNĐ7.2 billion.

Market observers said many banks face liquidity pressure though the State Bank of Việt Nam is pumping in a lot of money through open market operations (OMO).

A major part of almost VNĐ55 trillion were absorbed by the banks as of January 16.

The observers attributed the low liquidity to the fact that banks had to out a lot of money to enterprises and financial institutions, something that often happens a few weeks before Lunar New Year.

But other analysts dismiss the claim of low liquidity, pointing to banks’ transactions in the last few months of 2016. Most lenders had enough liquidity, with some even having plentiful cash, that they were ready to meet the payment demands of the market.

This was also proved by the fact that interest rates kept falling on the inter-bank market.

The liquidity helped the government successfully issue bonds totally worth VNĐ281 trillion.

Listed enterprises expect high growth in the new year

The Tân Bình Import and Export Joint Stock Corporation (Tanimex-code Tix) has recently approved an ambitious plan in 2017 according to which its total turnover is estimated at nearly VNĐ570 billion (US$25.33 million), tripling last year’s figure, and its after-tax profit will be around VNĐ87.5 billion (3.89 million), registering a year-on-year increase of 31 per cent.

Explaining about the above ambitious targets, Tanimex leaders said that the company would sell series of real estate projects in 2017, including Tanibuilding and Tân Bình apartments.

In regard to investments, Tanimex has planned to inject between VNĐ300 billion and VNĐ400 billion to develop a project to build for-lease warehouses with a total area of between 50,000 and 70,000 square metres in HCM City, the provinces of Long An, Bình Dương and Đồng Nai or in nearby industrial parks.

Aiming to take advantages created from positive business results in 2016, the recovery of crude oil in the world and the decision to reduce petroleum production of the Organization of the Petroleum Exporting Countries (OPEC), Petrovietnam Technical Services Corporation (PTSC) expects to achieve growth equal to beyond last year’s.

The Hà Đô Group has just approved a production and trading plan for 2017 with gross revenue estimated at over VNĐ2,620 billion, a year on year increase of 32 per cent.

A group leader revealed that the company was preparing a long-term strategy for the 2017-2020 period with growth in investment averaging at between 10 and 15 per cent, the majority of which would be used for hydropower to increase its capacity to 200 MW by 2020.

Not only enterprises being listed on the official exchange markets like HCMC and Hà Nội stock exchanges are self-confident in outline ambitious production and business plans but also those trading their shares on the unlisted public company market (UpcoM) also unveiled their big business prospects in 2017.

Việt Nam Garment and Textile Group (Vinatex) has just announced that it achieved its total revenue of 41,337 billion in 2016, up per cent in the previous year, and its pre-tax profit of estimated VNĐ1,430 billion, up 9 per cent.

In spite that the domestic garment and textile industry is predicted likely to cope with many difficulties due to a strong decrease in consumption demand in big import markets and fierce competition from countries that have policies supporting tax and the exchange rate, Vinatex has still set high growth targets for the new year.

In particular, Vinatex has set targets of achieving a 14 per cent growth in the industrial production value and a 11 per cent growth in export value. The company also expected to raise its turnover and pre-tax profits by 12 per cent and 6 per cent respectively.

To realise those goals, the company will develop several measures to ensure market shares, one of which is to cooperate with nationwide stores to distribute Vinatex products. By doing this way, the company will cut cost for leasing business space and paying workers.— VNS