Interest rates may fall further in the second half of the year
Large market-share banks forecast that deposit and lending interest rates will continue to decrease in the second half of 2020.
During the first half of 2020, the banking system has continuously reduced deposit interest rates and adjusted lending interest rates many times to stimulate credit demand in the context of the pandemic.
The downward trend may not stop. A survey by the Department of Forecasting and Statistics (State Bank) said that more than half of the participating banks assessed that the deposit and lending interest rates will continue to decrease in the third quarter and the whole year of 2020. In particular, banks with a large market share expect interest rates to continue to decrease. In addition, banks said they will continue to reduce the average price of products and services to support customers facing difficulties due to Covid-19.
This assessment was made in the context of low credit growth in the first half of the year (3.26%) and an expected increase of only 3.5% in the third quarter. By the end of 2020, banks predict credit growth of about 10.5% - much lower than the target of 14% set at the beginning of the year.
Due to poor output credit and gradually lower mobilization interest rates, all banking groups believe that capital mobilization growth in 2020 will tend to decrease. Capital mobilization of the entire credit institution system is expected to increase by an average of 3.1% in the third quarter and increase by 8.3% in 2020. In addition, capital mobilization with a term of over 1 year is forecast to grow better than that of a term of less than 1 year.
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| Transactions at commercial banks in Vinh city. Photo by Viet Phuong |
Most banks reported a decline in the overall business situation of the system. The overall risk level of customer groups, their business and financial conditions, and the demand of the economy for banking products and services have clearly decreased. Accordingly, the pressure to set up high credit risk provisions will greatly affect the income and pre-tax profit of the banking system in 2020.
About 26% of banks said their business results in the second quarter continued to decline, and only 32% said their business results improved compared to the previous quarter.
It is forecasted that in the third quarter of 2020, although domestic economic activities resume, Vietnam's major partner economies will still be affected, which will continue to adversely affect the industry's business prospects. However, in this context, more than 50% of banks still expect to improve profits compared to the second quarter of this year.