Businesses nervous about rising interest rates
If rates continue to rise, companies will not be able to increase production.
On April 15, VPBank raised interest rates on a series of deposit terms. A 36-month online deposit interest rate increased by 0.5 percentage points to 6.1 percent per annum, applied to deposits of less than VND 300 million. Interest rates are 6.7% for deposits ranging from VND 10 billion to less than VND 50 billion, and 6.9% for deposits over VND 50 billion.
Interest rates on 24-month deposits also increased by 0.4-0.5 percentage points to 6-6.8% per annum and were applied to deposits worth less than VND 300 million. to more than 50 billion VND.
Earlier, the Military Bank announced new interest rates for April with an interest rate increase of 0.2 percentage points for 1-3 month and 36 month deposits.
At the end of March, 10 commercial banks raised their interest rates on deposits up to 0.6% per annum. OCB, for example, raised interest rates for online deposits by 0.6 percentage points for six-month deposits, 0.5 percentage points for nine-month deposits and 0.2 percentage for 12-month deposits.
NamA Bank offered 0.2 percentage points more for 6-month deposits, while MB Bank 0.4% for 12-month deposits and BacABank 0.3 percentage points for 6-month deposits and 0.1 percentage point for 12-month deposits.
Other commercial banks such as VietCapitalBank, SeABank, VIB, DongABank and Techcombank raised over-the-counter savings interest rates by 0.01 to 0.2 percentage points.
A survey found that interest rates at many banks have risen by 0.3-0.7% over the past three months, significantly raising the interest rate base, above expected levels for the whole l year 2022.
According to analysts, interest rates have risen not only because of inflation, but also because of the lack of liquidity of banks.
According to the State Bank of Vietnam (SBV), by the end of the first quarter of 2022, the economy-wide credit growth rate had reached 5.04%. This means that in the first three months of the year, banks injected VND 526.4 trillion into the economy through loans. The growth rate of 5.04% is the highest rate in the last decade. The strong demand for capital has led to a reduction in the liquidity of many banks.
Since mid-January 2022, SBV has been pumping money into the market. However, the interest rate on the interbank market remained high at more than 2% per year, twice as high as the same period last year.
Analysts say a new interest rate race is beginning. Many commercial banks offer interest rates above 7% per annum, and interest rates are heading towards 8% per annum.
ACB, MSB and VietCapital offer interest rates on deposits of up to 7-7.1% per annum. Meanwhile, the highest rate of NamA Bank is 7.4%, SCB 7.6% and Techcombank 7.8%.
If liquidity is still low and inflationary pressure continues to rise, interest rates on deposits will rise further. Smaller banks could spark another run on interest rates as they run out of cash.
The ability to keep interest rates low is very difficult for credit institutions.
Vietcombank Securities (VCBS) predicted that the inflation rate in April would be 0.3-0.4% from the previous month and 2.21-2.31% from the same period last year , as there are no signs of lower gasoline prices.
Inflationary pressure will force the central bank to tighten the money supply, which will not help commercial banks maintain sufficient liquidity.
Meanwhile, it has become more difficult to raise capital by issuing bonds. Tan Hoang Minh’s controversial case has made investors more cautious. As a result, businesses have to rely on bank loans, which has led to an increase in loan demand and put pressure on loan interest rates.
Nguyen Hoang Son, director of An Son Company in Hanoi, said interest rates on 12-month deposits at many banks were approaching 7 percent a year. With these interest rates on deposits, interest rates on loans are 10.5-11% per annum, with a margin of 3.5-4% per annum. If interest rates on deposits continued to rise, interest rates on loans would be even higher.
Meanwhile, input costs for production (fuel, raw materials) have risen and banks will face great difficulties if loan interest rates also rise.
Nguyen Cong Quyet, owner of a private business in Hanoi’s Thuong Tin district, said he borrowed capital from a bank at an interest rate of 7.9% for the first three months, then 8 .4% for the following month. However, he was warned that the loan interest rate will be higher in June.