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Bank capital accumulated into government bonds due to weak credit output?

Wednesday 08, 07 2020
The surplus of input capital in the context of weak output credit has partly pushed capital flows into the government bond channel.
Bank capital accumulated into government bonds due to weak credit output?

According to the weekly monetary market news from June 29 to July 3, released by SSI Securities Company, last week, the open market and the interbank market were still quite calm despite stepping through the time of closing the quarter. important. The State Bank of Vietnam (SBV) only net injected VND 1 billion through 7-day term purchases, with an interest rate of 3% / year. The interest rates went sideways on the interbank market, staying at 0.21% / year for the overnight term and 0.3% / year for the 1-week term.

In contrast, in market 1 (the market of economic organizations and residents), commercial banks simultaneously reduced their deposit interest rates from 0.1-0.9 percentage points depending on the term from 1 / 7/2020. Leading banks are state-owned banks with a decrease of 0.25-0.3 percentage points for terms of less than 6 months and 0.5 percentage points for terms of 6 months or more. Some banks with larger reductions (0.5-0.9 percentage points) are Techcombank, ACB, TPBank ... Commercial banks often mobilize competitive interest rates (VPBank, SHB, HDBank ...) also decreased from 0.1 -0.3 points%.

This is the strongest interest rate cut and continues the decline from the end of 2019 to the present.

The current interest rate is at 3.5-4.25% for terms of less than 6 months, 4.4-6.7% for terms of 6 to less than 12 months, from 5.5-7.5% / year. with a term of 12, 13 months. This interest rate has been lower than 0.75% -1% / year for terms of less than 6 months and lowers from 1% -2% / year for terms of 6 months or more compared to the end of 2019.

In addition to the reduced impact of executive rates, according to SSI experts, deposit interest rates dropped sharply mainly due to weak credit output. Specifically, the credit growth as of June 29 was 3.26% compared to the end of 2019, despite an acceleration in June (up 1.28% compared to May) but still very low compared to 7, 36% of the first 6 months of 2019.

Bank capital accumulated into government bonds due to weak credit output?

"Deposit growth is higher than credit, making commercial banks redundant VND and adjusted to reduce interest rates. After this reduction, it is likely that deposit interest rates will move sideways due to the decrease in deposit rates from 1 -2% is close to the reduction of lending interest rates; credit growth prospects will improve as economic activities, trade is gradually recovering and public investment disbursement is accelerated; balancing with the weak exchange rate and inflation factors, "said an SSI expert.

The excess of input capital in the context of weak output credit has partly pushed capital flows into the government bond channel.

According to SSI's statistics, since the beginning of June, the State Treasury has continuously increased the bid volume. In the first bidding session of July, the State Treasury ordered VND 14.75 trillion, an increase of 23% compared to the last week of June and the most tender session in recent years.

The demand from market members is also very large, the total number of registration is 3.6 times higher than the bid volume and the whole 14.25 trillion dongs of 10, 15 and 20-year terms were issued, only 500 billion dongs 7-year term no successful bid. The coupon interest rate decreased at all terms.

"Although the demand of the State Treasury is expected to increase, the surplus of commercial banks makes the demand for government bonds remain high and will keep the yields of government bonds going sideways in the short term. In the long term, earnings movements depend heavily on the speed of disbursement of public investment and credit growth of commercial banks ", the report of SSI emphasized.

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Source: Vietnam Finance

Categories:
Banking & Finance

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