In 2020, despite many difficulties caused by the outbreak of the Covid-19 pandemic, many banks still have large revenues and profits. According to SSI Securities Corporation, the current deposit interest rate is lower than that at the end of 2019 by 1.5% to 3% per year and reaches the lowest point in the history. Meanwhile, the State Bank said that by October 2020, the average lending interest rate decreased by 0.6-0.8% per year as compared to the rate at the end of 2019. Thus, the gap between deposit rates and lending rates is getting bigger and bigger.
The gap between deposit rates and lending rates helps banks increase the profit margins. According to a report released by FiinGroup, the net profit margin (NIM) of 21 listed banks in the third quarter of 2020 increased by 9.7 basis points ascompared to the second quarter of 2020. At the same time, the increase in basis points in the third quarter of 2020 is recorded to be the largest quarterly increase since the first quarter of 2018. Interest income and similar earnings increased 4.5% while interest expense and other costs decreased 2.6%, which leads to an increase in NIM. This shows that the lower lending rates do not correspond to the change in deposit interest rates.
The average lending interest rate of 20 out of 21 listed banks (except for Bao Viet Bank) increased to 9.2% per year from 9% per year in the second quarter of 2020. In general, profit margins increased sharply at most banks in the third quarter of 2020, including commercial banks with state capital that had sharply reduced interest rates to support customers affected by the outbreak of the Covid-19 pandemic. Some banks, though experienced a decrease in their profits as compared to the same period last year, still carried out their business operations without losses or major difficulties.
According to experts, in the current context when the deposit interest rate has dropped significantly, banks should reduce the corresponding lending interest rates to support businesses to overcome difficulties. However, there is also another ideathat till the end of this year, it is very unlikely that the interest rate would decrease further because consumer credit has shown signs of recovery and the capital needs of businesses are increasing rapidly. Therefore, there are few possibilities that banks would lower the lending interest rate further. This also means that businesses should not hope to find cheapsources of capital in the coming time.
The Prime Minister said that although the State Bank and credit institutions have made great efforts to reduce lending interest rates, they have not quite met the expectations of businesses and people. According to the Prime Minister's assessment, the State Bank of Vietnam has managed an active, flexible and skillful monetary policy, contributing to maintaining macro stability, controlling inflation and promoting economic growth. However, he also asserted that, although the State Bank and credit institutions have, to some extent, reduced the lending interest rates, the attempt is not enough to support bussiness and individual customers in the hard time of Covid-19, especially as regards to the old loans, loans with medium and long term repayment.
In the context of economic slowdown, all sectors of the economy should support each other to ensure economic stability. Nevertheless, many commercial banks are not willing to lower the lending interest rates but taking profits at maximum.The Prime Minister hoped that the banking sector would not aim at profit only but continued to share with investors, businesses and people to enhance national production.
In the new normal era post Covid-19 pandemic, the Prime Minister required banks to reduce the increase in bad debt, handle outstanding bad debts, and ensure stability in both the system of credit institutions and each institution alone, at the same time, giving as much support to businesses and people as possible.
Compiled by VietnamCredit