Tag: Interest rates

Regulatory rates reduced by 0.5-1% from March 15.

The commercial banks committed to a reduction in loan rates of between 0.5 and 3 per cent per annum.

Figures reveal that 12 banks have committed to cut rates from 0.5-3 percentage points per annum.

Mr. Petri Deryng, Head of Finland’s Pyn Elite Fund, has some comforting words for investors in its portfolio.

SSI Research has published a report on the estimated business results of 26 companies in the third quarter of this year. Twenty-four are forecast to post profit growth while two are forecast to see a fall in profits. Banking profits are believed to have grown strongly in the third quarter despite interest rate hikes putting pressure on the net interest margin (NIM). The leading banks in terms of profit were Vietcombank, BIDV, ACB, and VPBank.

Liquidity in the banking system has risen in recent times, helping to cool interbank interest rates. The overnight interbank interest rate has fallen from more than 8.35 per cent per annum to 7.72 per cent. According to the Vietnam Interbank Market Research Association (VIRA), liquidity is forecast to be less of an issue but still not abundant.

A recent report from the Agribank Securities Company (Agriseco) noted that the banking sector will face challenges maintaining profit growth in 2022 and 2023 at levels recorded in 2020 and 2021. Growth has declined amid insufficient space for credit growth, while Net Interest Margins (NIM) face pressure from rising deposit rates as lending rates prove difficult to increase.

In the money market last week (September 19 to September 23), the State Bank of Vietnam (SBV) continued to use open market operation tools to maintain sufficient liquidity in the system and indirectly move on the interbank interest rate level. At the end of the week, the central bank net withdrew VND34.6 trillion ($1.46 billion) through the open market channel and VND23 trillion ($967 million) through foreign currency sales. It recently increased some operating interest rates, after nearly eleven years since the last increase. Rates such as discount rates and refinancing rates were raised by 1 per cent.

Viet Dragon Securities (VDSC) has said that in the context of central banks in other countries not dealing resolutely with high inflation, the USD may return to its peak established in early 2022. This means that pressure will inevitably be on the VND/USD exchange rate, and the VND could depreciate 4-5 per cent this year. Notably, lending interest rates will also increase sharply in the near future.

Mirae Asset Securities believes that interest rates will increase in the second half of 2022 to stabilize exchange rates and control inflation, which will affect industries and companies using a high degree of financial leverage. It is also optimistic about companies involved in industrial park (IP) development.

SSI has forecast that deposit interest rates may increase 0.5-0.7 percentage points over the final two quarters of the year and the year as a whole, adding to the existing 1-1.5 per cent per annum rate. Vietcombank Securities Company (VCBS), meanwhile, said the race to increase deposit rates will affect profits to the end of the year.

Securities companies expect increases in deposit interest rates to slow in the third quarter of 2022 because of low demand for capital mobilization. The pressure to raise deposit rates will increase by the end of the year, however, after the State Bank of Vietnam (SBV) opens up credit space for commercial banks and especially when the ratio of short-term capital for medium and long-term loans falls from 37 to 34 per cent, under a Decision from the SBV to take effect on October 1.

Bidding on government bonds is at a low level, although registrations are 1.8-times higher than bids. At the same time, interbank interest rates have remained high. This shows that the pressure to increase interest rates is becoming increasingly clear, especially as the speed of public investment disbursement will gradually rise.

The interest rate differential between the primary and secondary bond markets is widening. In addition, credit institutions are participating less in the government bond market due to concerns over high inflation as well as expectations of a new interest rate hike. The pressure to increase government bond interest rates in the primary market is therefore becoming clearer.

Different banks cutting or raising deposit interest rates for different terms, according to Bao Viet Securities Company.

The corporate bond market is expected to continue to develop this year, with expansions seen in the size and diversity of products and with an increasingly complete legal framework that ensures sustainable development. Low interest rates will also work in the market’s favor.

Vietnam has available foreign exchange reserves of more than $100 billion and debts below 40 per cent of GDP, which are mostly soft loans from supranational lenders on favorable terms. Such debts do not increase the country’s vulnerability to tightening global monetary policy. Experts from VinaCapital believe that Vietnam is in a favorable position and will be under no pressure when the US Fed hikes interest rates this year.

The banking sector should continue to support and remove difficulties facing individuals and businesses, promote the recovery and development of production and business, and further cut lending interest rates, especially for priority sectors, and direct capital flows into production and business, Deputy Prime Minister Le Minh Khai told a conference on the tasks in 2022 for the banking sector on December 29.

The central bank held a regular press conference on December 28, where it summed up the banking sector in 2021 and set tasks for 2022.

Analysts believe that as liquidity in the banking system continues to be abundant and credit begins to open up, interest rates will remain low until the end of the year.