Concerns about high deposit interest rates.

TPO - High deposit interest rates are putting significant pressure on lending rates, raising concerns about increased bad debt, especially in the personal consumer lending sector. Experts warn that if the cost of capital does not cool down soon, the debt repayment pressure on households will continue to rise.

According to market observations, many banks are still maintaining deposit interest rates of 8-9% per year for terms of 6 months or more, in order to compete for capital. This keeps the input costs of banks high, making it difficult for them to reduce lending interest rates.

In a newly released report on the banking sector, experts from VIS Rating, a credit rating company, stated that liquidity pressure from high interest rates and unfavorable external fluctuations are negatively impacting asset quality and profitability of banks.

Notably, small and medium-sized banks were most significantly impacted. In the first quarter, many banks recorded a sharp increase in overdue loans in the individual customer segment, especially for home loans, household business loans, and unsecured consumer loans. Net interest margins (NIM) narrowed while credit costs increased, leading to a significant decline in profitability.

According to VIS Rating, the industry-wide non-performing loan ratio increased by 11 basis points compared to the previous quarter, reaching 2.2% in the first quarter. This trend reflects the increasing rate of new non-performing loan formation amidst significant pressure on borrowers from high capital costs and incomes that have not recovered proportionally.

High interest rates increase bad debts for banks.

The increase in bad debt is concentrated mainly in medium and small-sized banks such as OCB, TPBank, PGBank, Bac A Bank , and VietBank. Not only has overdue debt increased, but the bad debt coverage ratio at many institutions has also decreased by about 10 percentage points, indicating that the risk buffer is becoming thinner.

Larger banks have maintained more stable asset quality thanks to diversified loan portfolios, strong customer bases, and high levels of reserves.

VIS Rating experts analyze that the biggest risk currently lies in consumer credit and retail lending, as household financial leverage is increasing rapidly amidst persistently high interest rates. For middle-income customers, the sharp increase in borrowing costs significantly impacts their ability to repay debts.

Furthermore, liquidity pressure in the system shows no signs of easing. In the first quarter, the ratio of CASA deposits to total outstanding loans across the entire industry decreased to 18%, 2 percentage points lower than the previous quarter. The decline in deposits occurred among both individual and corporate customers, forcing many banks to increase long-term deposits with high interest rates.

Intense competition for capital mobilization has also led many banks to rely more heavily on short-term funding in the interbank market. This makes it difficult to reduce the cost of capital in the short term and continues to put pressure on lending interest rates.

VIS Rating predicts that the shrinking Net Interest Margin (NIM) and rising credit costs will continue to erode the core profits of small and medium-sized banks this year. If interest rates remain high for an extended period, the risk of increasing consumer non-performing loans will be a major challenge for the banking system, especially for those with a high proportion of retail lending but limited risk provisioning capacity.

Source: https://tienphong.vn/lo-ngai-lai-suat-huy-dong-neo-cao-post1847056.tpo