Bank lending interest rates to remain steady, say experts

November 04, 2019 - 08:58
After increasing steadily in recent times, deposit interest rates at most banks are standing at rather high levels.
Viet CapitalBank is offering 10.2 per cent for 60 months. — Photo

Compiled by Thiên Lý

After increasing steadily in recent times, deposit interest rates at most banks are standing at rather high levels, including 8.5 per cent for 12-month terms at ABBank, Viet Capital Bank and VietABank.

Some others such as OCB, BacA Bank, NCB, Bảo Việt Bank, and Nam Á Bank are offering around 8 per cent.

Only a few banks have kept their rates moderate: MB is offering 7.5 per cent for 12-month deposits and BIDV is offering 7 per cent.

Some credit institutions are selling certificates of deposits to individual customers with coupons rates of over 10 per cent.

Viet CapitalBank is offering 10.2 per cent for 60 months.

Analysts said most banks increased interest rates on long-term deposits to implement the central bank’s roadmap for reducing the use of short-term deposits for medium- and long-term loans.

The State Bank of Viet Nam required banks to reduce the use of short-term deposits for medium- and long-term funds to 40 per cent this year from 45 per cent last year.

Dr Đặng Đức Anh, deputy director of the National Centre for Information and Forecast, said banks had to increase deposit mobilisation since the central bank had tightened money supply while demand for loans remained very high.

It is self-evident that any increase in deposit interest rates will have an impact on lending interest rates, but this time experts are divided on this.

Some said there was a possibility that banks would continue to hike deposit interest rates for the rest of this year, and it would result in higher credit interest rates.                             

But many others strongly believed there would be no such impact.

According to Dr Cấn Văn Lực, a banking expert, the increasing deposit interest rates do not reflect the banking sector’s liquidity as seen by the fact that many major banks have kept their deposit interest rates steady.

MB still offers only 7.5 per cent for 12-month deposits while VietinBank and BIDV are keeping it at 7 per cent.

The inter-bank interest rates have been steady and even shown signs of falling.

Dr Trần Du Lịch, a member of the Prime Minister’s Economic Advisory Group, said it was clear from this that lending interest rates would remain unchanged from now until year-end.

Other experts said lending interest rates relied on many factors including foreign exchange and inflation rates, and these had remained stable since the beginning of the year.

The central bank would strive to ensure deposit interest rates do not increase any further, they said.

SBV deputy governor Đào Minh Tú said the central bank’s recent decision to reduce key interest rates by 0.25 percentage points was also aimed at enabling banks to cut lending interest rates, especially on loans to businesses in priority sectors.

It was likely to make another 0.25 percentage point cut at the end of this year or early next year, he revealed.

Tax policy hits fertiliser companies’ bottom line

In the first nine months of the year Petrovietnam Fertilizer & Chemicals Corporation (DPM) reported net revenues of VNĐ5.4 trillion (US$234.7 million), a year-on-year decrease of 22.6 per cent. Its after-tax profit was down 73 per cent to VNĐ152 billion ($6.6 million).

A report from Viet Capital Securities Company said DPM’s profit target in 2019 would likely decrease by 17.3 per cent.

Bình Điền Fertiliser Company (BFC) reported a similar situation with turnover and profit declining by 8.8 and 72.7 per cent.

The Southern Fertiliser Group made a loss of VNĐ8.9 billion with the third quarter alone accounting for VNĐ4.3 billion.

A company spokesperson said sales fell sharply in the third quarter.

Why is this happening to fertiliser companies?

The DPM management said the bad weather was one of the main reasons the company found it difficult to sell products in the third quarter.

A BFC spokesperson concurred with this, adding that the agricultural sector also faced a deep drop in prices meaning many localities had to reduce their production targets.

Imports of foreign fertilisers remain at a very high level, which also causes difficulties for the domestic industry.

According to the General Customs Department, in the first five months of this year Việt Nam imported more than 1.7 million tonnes of fertilisers for US$488 million.

A DPM spokesperson said besides the market difficulties they also had to cope with a sharp increase in fuel prices.

But analysts said the biggest problem for fertiliser producers was the value added tax (VAT) policy, which significantly eroded their profits.

Fertilisers are not subject to VAT, and this means producers are not entitled to VAT refunds on inputs including machinery and equipment and other fixed assets, which increases cost by 5-8 per cent.

Many fertiliser companies have repeatedly petitioned lawmakers to amend Law No.71/2014/QH13 that waives VAT on fertilisers to help them in their current plight.

They explained that this waiver badly hit companies, especially those that had invested in modern technology.

PVFCCo, for instance, should have got VAT returns of VNĐ1 trillion between 2015 and 2017.

Analysts said lawmakers should add fertilisers to the list of products that are subject to VAT. VNS