Still waiting for loan interest rates to decrease further

According to Lao Dong newspaper reporters, the mobilization interest rates of commercial banks continued to decrease by about 0.2 - 0.5%/year in January 2024, mainly for terms of less than 12 months. Of which, 4 commercial banks with State-owned capital reduced by 0.2 - 0.3%/year for short-term mobilization interest rates. Most of the private joint-stock commercial banks adjusted their interest rates down by 0.1 - 0.5%/year. Some banks adjusted their interest rates up slightly by 0.1 - 0.2%/year such as VPB, SSB, ABB, mainly because the interest rates had decreased too deeply in the previous period.

The average interest rate for 12-month deposits is generally at 4.6 - 5.2%/year. The interest rate gap between state-owned commercial banks and joint-stock commercial banks has narrowed from 2 - 3%/year in the 2021 - 2023 period to less than 1%/year for short terms.

The sharp decrease in deposit interest rates in recent times has helped the lending interest rate level decrease compared to the end of 2023. Currently, most banks apply two interest rates: preferential loan interest rates applied to short loan terms from 3-12 months and interest rates after the preferential period. The adjustment margin of bank loan interest rates between preferential and post-preferential at common banks is from 2-3.8%.

According to the survey, preferential interest rates for commercial housing loans at banks in March 2024 ranged from 5-14.05%/year. After the preferential period, floating interest rates fell to around 8-13%/year.

However, credit growth by the end of January 2024 decreased compared to the end of 2023. According to Vietcombank's leaders, by the end of January 2024, the bank's credit decreased by about 30,000 billion VND compared to the end of 2023, due to the trend of borrowing to buy consumer real estate decreasing from 2023 and dragging down to January 2024 in the context of economic difficulties, reduced people's income, sluggish real estate market, and lack of supply.

Regarding wholesale customers, difficulties mainly focus on legal issues related to land, slowing down the progress of new projects and affecting the disbursement of medium and long-term loans. In addition, many specific credit segments are seasonal at the end of the year, such as outstanding loans for international payments that often increase at the end of the year and decrease when customers repay their debts at the beginning of the following year; export enterprises often have a collection period at the end of the year; FDI enterprises often repay short-term loans for settlement, etc.

Dr. Nguyen Duy Phuong, Director of Financial Investment at DG Capital, said that the main reason for the credit decline is due to lack of output. However, there is also the issue of high interest rates, which makes businesses that want to invest in the medium and long term hesitant.

Medium and long-term loan interest rates at state-owned commercial banks are currently relatively low, but at joint-stock commercial banks they are still quite high, with lending interest rates ranging from 9 - 12%/year. The reason is that the cost of capital of these banks is quite high (long-term mobilization interest rates in early 2023 at private joint-stock banks fluctuated between 9 - 10%/year). However, over time, the source of high-interest mobilization gradually decreases, this is an opportunity for banks to gradually reduce lending interest rates.

Banks may not further reduce deposit interest rates but may reduce lending interest rates. However, in addition to the efforts of the banking system, there needs to be active participation of competent authorities from central to local levels in resolving legal issues for investment projects, improving the business environment, simplifying investment processes and administrative procedures, facilitating business activities of people and enterprises, Dr. Nguyen Duy Phuong stated his opinion.

Source