Public and transparent loan interest rates

Commercial banks' public disclosure of average lending interest rates will create conditions for businesses to have more options and opportunities to access cheaper capital sources.

Customers transact at ABBANK branch.

Deposit and lending interest rates continue to trend downward. According to data from the State Bank of Vietnam , as of March 25, the average deposit and lending interest rates for new transactions were 3.1%/year and 6.5%/year, respectively, down about 0.4%/year and 0.6%/year compared to the end of 2023.

Interest rates fall across the board

Recently, a series of commercial banks have announced loan programs with preferential interest rates. For example, Agribank announced to continue implementing a preferential credit program for the forestry and fishery sectors with a scale of 8,000 billion VND.

The preferential interest rate of the program is at least 1-2% lower per year than the average lending interest rate of the same term of Agribank in each period. At the same time, with the desire to support more and more customers to access preferential loans to develop the economy and serve their living needs, Agribank also spends about 50,000 billion VND to implement a preferential short-term loan program for individual customers to serve production activities,

business with interest rates from only 3.0%/year, 2% lower than the floor lending interest rate in this field; and 10,000 billion VND to implement a preferential short-term loan program for individual customers to serve their living needs with interest rates from only 4%/year.

Similarly, Deputy Director in charge of ABBANK's Small and Medium Enterprise Customer Division, Dao Minh Tuan, also said that the bank has reserved VND10,000 billion in preferential interest rates for businesses, with the average loan amount reduced by 2-3% compared to normal loans; focusing on key industry groups such as construction, construction materials, food, beverages, medical equipment, telecommunications, logistics, etc. "These are groups with great growth potential in the coming period," said Mr. Dao Minh Tuan.

In addition, low interest rates have also appeared in many lending programs of banks recently such as: Sacombank with a credit package of 10,000 billion VND with an interest rate of only 3%/year to meet the borrowing needs of individual and corporate customers; BAC A BANK with a credit package of 10,000 billion VND reducing interest rates for individual customers to only 5%/year;...

Or at SHB, this bank also simultaneously reduced the interest rate of preferential loan packages to 5.79%/year. For individuals, the loan interest rate was adjusted down to 6.39%/year for short-term loans and 5.79%/year for medium- and long-term loans.

At the same time, with the preferential home loan package, customers enjoy preferential disbursement of up to 90% of the value of the purchased real estate, loan term up to 25 years, preferential interest rate and principal grace period up to 24 months. Notably, loyal customers who use many of the bank's products and services can receive an additional interest rate reduction of up to 1%/year.

Interest disclosure

After the Prime Minister's request and the State Bank of Vietnam's repeated urging, most credit institutions have now publicly disclosed the average lending interest rate and average interest rate difference. Accordingly, the average lending interest rate in March 2024 at Agribank is 7.47%/year; the average cost of capital is 6%/year; of which, the average mobilization interest rate is 4.2%/year, other costs (including mandatory reserves, liquidity reserves, deposit insurance, operating costs) are 1.8%/year.

With the above average lending and deposit interest rates, the current interest rate gap between lending and deposit is 1.47%/year. This is considered the lowest gap in the current banking market, while the gap at commercial banks is usually 3-4%.

Meanwhile, VietinBank currently has an average lending interest rate of 6.3%/year. The difference between the lending interest rate and the average deposit interest rate is 2.45%/year. At Vietcombank, the average lending interest rate in March is 6.4%/year, the difference between the lending interest rate and the average deposit interest rate at this bank is 3.4%/year. The interest rate difference after deducting costs related to capital mobilization and capital use at Vietcombank is currently only 1.8%/year. At BIDV, the average lending interest rate is 6.49%/year and the interest rate difference (average lending - average capital mobilization) is 3.12%/year.

In addition to the group of state-owned commercial banks, banks in the group of joint-stock commercial banks also announced average lending interest rates, specifically: TPBank (7.76%/year); Vietbank (7.32%/year); OCB (7.79%/year for individuals and 9.29%/year for businesses); VIB (8.6%/year for individuals and 7.69%/year for businesses); ACB (9.7%/year for individuals and 9.33%/year for businesses); BVBank (9.4%/year), Eximbank (8.17%/year); ABBank (7.42%/year for individual customers and 6.12%/year for businesses)...

Previously, LPBank also announced the average lending interest rate at the end of February 2024 for loans arising during the month, regardless of individuals or businesses, is 8.07%/year. The average interest rate for deposits of all terms is 5.82%/year. The average interest rate difference is 2.25%/year.

According to experts, with banks publicly announcing average lending rates, businesses will have the opportunity to access cheaper, more transparent capital sources, and credit growth is forecast to continue to recover in the coming time. Deputy Governor of the State Bank of Vietnam Pham Thanh Ha said: Low credit growth at the beginning of the year was mainly due to seasonal factors of the Lunar New Year and low capital absorption capacity, but it recovered in March. As of March 25, economic credit reached about 13.6 million billion VND, up 0.26% compared to the end of 2023 (March alone increased by 0.98%).

"Although the domestic and international economic outlook is still uncertain and unpredictable, world commodity prices are rising again, there is a potential risk of inflation, USD interest rates and international USD exchange rates are high, creating great challenges for interest rate management; however, the State Bank of Vietnam always encourages credit institutions to reduce costs, simplify credit granting procedures, and strive to reduce lending interest rates to support the economy," Deputy Governor Pham Thanh Ha emphasized.

Analysts from MB Securities Company (MBS) also commented that the current low interest rate environment is a prerequisite that needs to be maintained in the next 6 months when credit demand remains weak. This will motivate banks to lower lending rates to stimulate credit demand. The cost of capital (COF) will also be kept low. This will be an opportunity for banks to increase their net interest margin (NIM). "However, reducing lending rates to attract borrowers will also reduce the profitability of banks' assets," MBS experts further analyzed.

According to Nhan Dan Newspaper

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