Regarding monetary policy, many banks have reduced customer deposit interest rates by about 0.1- 0.5 percentage points this month. For example, VCB and CTG have lowered customer deposit interest rates by 0.2 percentage points (for 1- or 2-month term, 3-month term, ...), while the interest rates on customer deposits for 9-month term at BID have been lowered by 0.3 percentage points. Other medium sized banks (VPB, STB, MSB) have also taken the same action by reducing interest rates for long-term deposits by 0.1-0.5 percentage points.
At the same time, banks have also lowered lending rates to boost credit growth in the last quarter of this year. Since October 2020, VCB has provided loans to small and medium enterprises with a preferential interest rate of 5.9% / year. Agribank has also cut lending rates for the fourth time this year with a cut of 0.3 percentage points. MBB has applied 6.8% / year corporate loan interest rates with a limit of 80% of capital needs for a maximum period of 180 months.
As of October 26, 2020, credit growth had been estimated at 6.2% YTD, which is a slow growth compared to 6.1% at the end of September 2020. Credit growth is forecast to reach around 9.0% in 2020, before improving to 12.0% -13.0% in 2021.
Meanwhile, NPLs increased significantly in the first 9 months of 2020, but the delay in debt classification may keep bad debt reported below 3.0% as set by the State Bank.
Information from 17 listed commercial banks showed that NPLs increased significantly in Q3 / 2020. At the end of September 2020, these banks recorded VND 97,280 billion in bad debt, an increase of 30.7% compared to the end of 2019, and the non-performing loans to total assets ratio was 1.8%.
NPLs to total assets ratio. Source: FiinPro, SBV, VDSC
This figure is consistent with the NPL ratio announced by the State Bank at less than 2.0%, which is reached partly due to temporary measures taken by the State Bank to loosen regulations on bad debt recognition of banks for businesses affected by the Covid-19 pandemic. Supposing that credit growth may reach 9.0% y / y in 2020, VDSC estimates that the NPLs ratio (excluding those sold to VAMC) would be around 2.4% at the end of 2020.
In addition to the strong possibility of a sharp increase in NPLs, the ultimate impact on the health of the banking system depends on a combination of other factors including: 1) potential NPLs to be recognized; 2) the level of NPLs that the State Bank can accept; 3) the possibility that the State Bank of Vietnam would amend Circular 01 to extend the extension time of bad debt classification; and 4) the level economic recovery.
According to the State Bank, as of September 28, 2020, credit institutions had restructured repayment terms for more than 272,115 customers with loan balance of about VND 331,013 billion, equivalent to 3.8% of the total outstanding balance of the whole system. Analysts believe that not all restructured loans will turn into bad debt. However, it is likely that NPLs will continue to increase in the coming time due to the impact of the epidemic, and surpass the 3.0% threshold set by the State Bank for 2021.
In general, the recovery of credit growth is usually slower than that of other economic activities, and it is estimated to be around 12-13% in 2021. Hence, after considering the above factors, VDSC believes that the State Bank may extend its support policy including measures to extend debt repayment period or delay recording bad debts.