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Banks earn huge profits, businesses wait for interest rate cuts



Many businesses are disappointed with the move of private joint stock commercial banks, which cite a fear of a sharp drop in profits.

Banks earn huge profits, businesses wait for interest rate cuts

According to the State Bank of Vietnam, from July 15 to October 31, 2021, 16 banks cut interest rate for their clients totaling VND 15,559 billion, reaching 75.48% of the commitment. Four state-owned commercial banks accounted for up to VND 12,663 billion, or 81.4% of the total, compared to only VND3,000 billion, or 18.6% of 12 joint stock commercial banks.

Many businesses are disappointed with the move of private joint stock commercial banks, which cite a fear of a sharp drop in profits.

Among 16 banks that have pledged to reduce interest rates from July 15, LienVietPostBank says that if the average interest rate is reduced by 1%/year for existing and new loans by the end of 2021, the profit will decrease by about VND600 billion. Sacombank only reduced interest rates for customers worth VND 187 billion, saying that if the interest rate is reduced by 1%, the bank’s profit will fall by VND 1,000 billion.

Many private joint stock commercial banks have only slightly reduced interest rates, and paid little attention to supporting customers in difficult circumstances. Some banks have maintained their lending interest rates to businesses since late August 2020. Reducing lending interest rates is not a common policy and only applies to a few customers that can benefit the bank.

Surveys show that lending interest rates to corporate customers applied by some private joint stock commercial banks are still quite high, with 9%/year for 6-month term loans, 9.5%/year for 9-month term loans and 9.75%/year for 12-month term loans. However, after three months, it will be adjusted, adding a margin. The plus rate is from 1-3% for a 6-month term, from 1.25-2.25% for a 9-month term and from 1.5-2.5% for a 12-month term, depending on each customer. The lowest average interest rate for a 6-month loan is 9.5%/year.

Amid the complicated development of the Covid-19 pandemic, when many businesses have to stop operating, such interest rates are high. Meanwhile, the deposit interest rate until mid-2021 fell to a very low level, averaging only 4-5.5/year.

However, the business results report of the banking sector in the first nine months of 2021 showed great profits, despite difficulties caused by the epidemic. According to statistics of Maybank Kim Eng Vietnam Securities Company, in the first nine months of 2021, the pre-tax profit of the banking industry remained at a high level, reaching VND 132 trillion, completing an average of 77% of the profit plan for the year. Many private joint stock commercial banks recorded large profits, up to 10 times over the same period last year.

According to the State Bank of Vietnam, the balance of individual deposits has increased since the first quarter of 2020, along with the increase in the number of payment accounts that people open at banks.

By the end of the third quarter of this year, the total number of individual payment accounts exceeded 110 million. The increase in the number of open accounts is due to the Covid-19 epidemic, prompting people to use contactless payments.

Along with the increase in the number of payment accounts, the deposit balance at these accounts also reached a record level at the end of September, with VND 794,241 billion. On average, each citizen’s bank account has about VND 7.16 million for payment purposes. Notably, deposits have very low interest rates, only 0.1-0.3%/year and banks are benefiting from this source.

For a long time, many businesses and industry associations, National Assembly deputies, etc. have proposed to sharply reduce lending interest rates to help businesses overcome difficulties caused by the pandemic. Although interest rates have fallen, businesses say that they are still high and they want them to fall to 5%/year.

National Assembly deputies from HCM City suggested that banks should not focus on profits but share difficulties with businesses and people by reducing interest rates to a meaningful level, and restructure loans. They said the State Bank of Vietnam should specify the interest rate reduction.

However, it appears that businesses cannot put their hopes on banks. Many businesses say that they have enjoyed interest rate reduction of 0.1-0.3%/year. For loans with interest rates of above 10%/year, a reduction rate of 1%/year is not helpful.

Waiting for cheap capital

Banks earn huge profits, businesses wait for interest rate cuts

According to a quick survey by the Vietnam Chamber of Commerce and Industry (VCCI) with more than 500 large enterprises in August 2021, the support package in terms of capital and credit that has been implemented since the beginning of 2020 has brought limited results.

Only 30.72% of businesses have had access to this package. Just 0.65% of them said this support package met their requirements; 25.49% said it only partially met and 4.6% said it met very little of their requirements. About the scope of impact of the package, nearly 21.6% of businesses commented that it was only moderate, 5.9% said it was low, and only 3.27% said that it had a high level of impact.

Pham Dinh Doan, Chairman of Phu Thai Group, said that businesses are facing difficulties in paying salary for workers, opening markets, inventory, etc. These difficulties are not due to weak management capacity. If there is no cash flow now, many businesses will have to close or go bankrupt. Therefore, it is necessary to support them with a “tonic”, that is, cash.

James Villafuerte, chief economist of the Asian Development Bank (ADB), said that in the current situation, monetary policy is better than fiscal policy. As businesses suffer from revenue and profit reduction, tax reduction and exemption do not bring much effect. They need money and support to maintain operations. Therefore, in addition to fiscal policies such as tax and fee exemption and reduction, there should be direct support packages for businesses, such as loan packages with low interest rates.

Jay Roop, ADB’s chief economist in Thailand, said that in Southeast Asia, Thailand has been the most affected by the Covid-19 epidemic. Similar to Vietnam, 98 percent of Thai enterprises are small and medium size, generating 40% of GDP annually. They are very vulnerable. Importantly, these businesses in Thailand still exist and have not collapsed during the pandemic, thanks to many measures taken by the Thai Government.

Specifically, the Thai government has provided a low-interest loan package of US$8 billion for small businesses. The Government and the Central Bank of Thailand jointly screen businesses that can participate in this program.

Businesses have the opportunity to access loans up to $1 million, with low interest rates of 5%/year for 5 years. In addition, businesses can delay debt payments.

Thailand’s monetary policy-related solutions have brought good support to businesses. It is forecast that for the year of 2021, only about 0.3% of small and medium enterprises in Thailand will go bankrupt or be dissolved, Jay Roop said.

In Vietnam, according to the General Statistics Office, in the first 10 months of 2021, 93,000 enterprises withdrew from the market. A loan support package with a low interest rate and easy access has been discussed but is still not available, while the time is running out. The endurance of many businesses has reached the limit.

Tran Thuy



Upgrading the market for the sake of all participants




An employee passes electronic boards showing share prices inside Hồ Chí Minh Stock Exchange in HCM City. — VNA/ Photo Hữu Khoa

HÀ NỘI — An upgrade to emerging status will not only help the stock market develop quickly, transparently and sustainably, but also attract huge foreign capital inflows, said experts. 

Recently, the Government has directed to purge the market and improve the trading system’s capacity, showing its determination to enhance the quality of the stock market.

The refinement is to protect investors and open a door for the Vietnamese stock market to be upgraded from a frontier to an emerging market.

Prime Minister Phạm Minh Chính has taken an interest in the development of the capital market and the stock market, including the matter of upgrading the market. 

During a trip to attend the ASEAN-US Special Summit, on May 16, the PM visited the New York Stock Exchange (NYSE) – the largest stock exchange in the world – hoping it supports and shares experience to develop an effective and sustainable stock market in Việt Nam, and successfully build a regional financial centre. 

PM Chính also expected the NYSE and its Vietnamese partners to foster a sustainable, mutually beneficial partnership, contributing to making the Việt Nam-US comprehensive partnership more substantive and effective.

On the occasion, PM Chính witnessed the awarding ceremony of two cooperation documents in the fields of finance, banking and investment funds between Vietnamese and US partners, including a cooperation document between the Vietnamese State Securities Commission (SSC) and the NYSE regarding support to upgrade the country’s stock market and build a mechanism for investors to participate in both stock markets.

Previously, the PM chaired a conference on developing a safe, transparent, efficient and sustainable capital market to stabilise the macro-economy and ensure major balances of the economy.

At the conference, PM Chính also asked the Ministry of Finance to immediately solve the order congestion situation and invest in technological innovation and digital technology application, while urgently implementing measures to upgrade the market from frontier to emerging status to attract investment capital, especially foreign investment.

Dominic Scriven, head of the Việt Nam Business Forum’s (VBF) Capital Markets Working Group, said that the move to purify the market is a great effort and determination from the Government.

As the goal is to build and develop a safe, transparent and sustainable securities market, cleansing the market will ensure the interests of businesses and genuine investors, increase the stock market’s appeal, and attract more investment capital flows both at home and abroad.

Meanwhile, Phạm Lưu Hưng, chief economist of SSI Securities Company (SSI), said that the move to purge the market in recent years raised expectations that the upgrade process will be easier. Hưng hoped that in the next assessment, the Market Rating Organization (MSCI) will note some positive comments about what Việt Nam has done.

According to Minister of Finance Hồ Đức Phớc, the ministry is currently working with international organisations to deploy solutions to upgrade the stock market by 2025 as per the set roadmap.

Huge foreign capital inflows

Analysts believe that the upgrade from frontier to emerging status will be an important driving force for the market.

Zafer Mustafaoglu, World Bank (WB) Practice Manager for Finance, Competitiveness and Innovation (FCI) for East Asia and Pacific, said that the capital market development is a long-term effort, and there is still much work to be done in Việt Nam.

Upgrading to emerging market status is not only an improvement in position, but also signals strong enhancement in quality with a solid market foundation.

Upgrading to an emerging market also attracts the attention of high-ranking international investors to Việt Nam. In the stock market, upgrading to an emerging market could result in an additional US$10 billion in new investment for the country. The first year alone can receive an additional $2-5 billion.

According to Nguyễn Minh Tuần, General Director of AFA Capital Investment JSC, the criteria for upgrading from frontier to emerging status focus on two main factors – size and liquidity of the market (quantitative) and market access (qualitative).

In terms of size and liquidity, there are four criteria which are the number of companies included in the Standard Index, total market capitalisation, floating capitalisation and market liquidity. Việt Nam has almost met three standards, he said. 

The main issue is qualitative standards. In the latest ranking in June 2021, there are nine criteria that the country has not yet met, including the ownership rate, ownership restrictions and equal rights of foreign investors.


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EVN accelerating projects to gear up for hot season




EVN workers checks electricity equipment. — VNA/  Photo

HÀ NỘI — Vietnam Electricity (EVN) said it is accelerating power generation and grid projects, especially urgent infrastructure, to ensure supplies in the hot season.

The State-owned group said in the first four months of 2022, the firm and its subsidiaries had started work on 30 projects and put into use 31 grid facilities between 110kV – 500kV.

It cited meteorological forecasting centres as saying that heatwaves this year are likely to appear in the northern and central regions later than usual, but won’t be too severe.

Power demand in the north is unlikely to rise sharply in May, and daily consumption will be around 805 million kWh.

EVN noted that this month, it is working to guarantee supply for production and business activities as well as daily life, especially the 31st Southeast Asian Games (SEA Games 31) and the 15th National Assembly’s third session.

It is maintaining high water levels at multi-purpose hydropower plants in the north, operating thermal power plants in the region, and importing about 540MW of electricity in May.

Its subsidiaries were also requested to ensure power supply in the dry season, ready manpower and equipment for any possible incidents due to natural disasters, and recommend people, agencies and factories use electricity in a safe and economical manner.

In April, the entire EVN system produced 22.62 billion kWh of electricity, up 1.9 per cent year-on-year. That added up to a four-month figure of 85.65 billion kWh, increasing 6.2 per cent. —


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Deputy Finance Minister Nguyễn Đức Chi takes charge of the State Securities Commission



Deputy Finance Minister Nguyễn Đức Chi. — Photo

HÀ NỘI — Minister of Finance Hồ Đức Phớc had assigned Deputy Finance Minister Nguyễn Đức Chi to take charge of the State Securities Commission (SSC) from May 19.

In a dispatch to the SSC, Minister Phớc stated that Deputy Minister Chi will manage the commission during the consideration and completion of personnel for the commission.

Earlier on May 18, the Party Central Committee’s Inspection Commission announced the inspection conclusions and Party disciplinary measures on the SSC Party Committee in the 2015-20 tenure and relevant individuals. Right after that, the Ministry of Finance directed the SSC, stock exchanges, the Việt Nam Securities Depository and relevant agencies to review and implement measures to remedy the violations and shortcomings.

Specifically, the ministry dismissed Trần Văn Dũng from the position of the Chairman of the SSC, while giving a warning to Vũ Bằng, former secretary of the SSC Party Committee in the 2015-20 tenure and former SSC Chairman.

Warnings were given to Nguyễn Thành Long, secretary of the Hà Nội Stock Exchange Party Committee; and Nguyễn Sơn, chairman of the management board of the Việt Nam Securities Depository for their wrongdoings during their tenures. —


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