Experts: Trimmed interest rates might affect NIMs

Commercial banks which have cut interest rates for short-term lending following the State Bank of Vietnam (SBV)’s cue might suffer a further decline in the net interest margin (NIM), experts said.
experts trimmed interest rates might affect nims

On July 7, the SBV decided to cut the annual maximum refinancing interest rate, rediscount interest rate and overnight interest rate applied to electronic inter-bank payments. It also cut the rate of loans in order to offset capital shortage in clearing of payments between the SBV and domestic banks by 0.25 percentage points. The new rates came into effect on July 10.

The annual short-term interest rate ceiling for credit institutions loans in VND has also been cut by 0.5 percentage points for some sectors.

Accordingly, businesses operating in agricultural, export and auxiliary industries; small and medium-sized enterprises; and high-tech firms can borrow loans at a maximum short-term rate of 6.5 percent per year, instead of 7 percent.

Following the decision, several commercial banks announced rate cuts.

The adjustments are expected to support businesses and boost economic growth, but they also may negatively impact banks’ NIM.

NIM is the ratio of net interest income to invested assets, with the net interest income being the difference between interest income and interest expense.

To maintain a sound NIM, commercial banks would have to reduce their deposit interest rates, which would probably send capital flows to other investment channels, said Can Van Luc, director of BIDV Training School at the Bank for Investment and Development of Vietnam (BIDV).

Commercial banks would also have to comply with the SBV’s Circular 06/2016/TT-NHNN, which specifies a roadmap for the maximum ratio of short-term funds used for medium and long term loans.

Under the circular, the 50 percent ratio will be kept until December 31 this year. It will drop to 40 percent from the beginning of 2018.

To prepare for the deadline, it is unlikely that commercial banks will further push down their deposit interest rates. Otherwise, they would face difficulties in term of liquidity and their net interest income would be harmed, financial expert Nguyen Tri Hieu said.

According to KIS Vietnam Securities Company analysts, the Vietnamese banking system NIM has continuously declined from 3.07 percent in 2013 to 2.69 in 2016. This level is also much lower than those of regional neighbours such as Thailand (3.07 percent), Indonesia (5.82 percent) and the Philippines (3.58 percent).

With such a low NIM, the banking system would find it hard to suffer a savings rate reduction, Luc said.

Statistics from the General Statistics Office of Vietnam show that capital mobilisation of credit institutions increased by 5.89 percent in the first six month of the year, compared with 8.23 percent of the same period last year. Meanwhile, credit from January to June grew by 7.54 percent, the highest rate in the past six year.

Source: VNA

Related News

Flexible and proactive when exchange rates still fluctuate in 2025

Flexible and proactive when exchange rates still fluctuate in 2025

VCN - In the last days of 2024, as many forecasts, the US Federal Reserve (Fed) continued to cut interest rates, pushing the USD index up, creating pressure on domestic exchange rates. Therefore, domestic exchange rate management policies need to continue to be flexible and appropriate, thereby supporting businesses in import and export.
Untying the knot for green finance

Untying the knot for green finance

VCN - Green finance is a crucial resource for greening businesses. Completing the policy framework for green finance is urgently needed to unlock this capital flow.
Slower mobilization than credit may put pressure on interest rates

Slower mobilization than credit may put pressure on interest rates

VCN - According to the latest data from the State Bank of Vietnam (SBV), deposits in the banking system as of the end of September 2024 reached more than 14 million billion VND, an increase of 4.9% compared to the beginning of the year, but the rate was still slower than credit, which could put pressure on interest rates.
Credit continues to increase at the end of the year, room is loosened to avoid "surplus in some places - shortage in others"

Credit continues to increase at the end of the year, room is loosened to avoid "surplus in some places - shortage in others"

VCN - Credit demand continues to increase at the end of the year, thereby helping banks compete through continuing to adjust interest rates appropriately.

Latest News

Exports witness a rise of US$1 billion in the first 15 days of 2025

Exports witness a rise of US$1 billion in the first 15 days of 2025

VCN - Compared to the same period in 2024, exports in the first half of January 2025 increased by more than 6%, equivalent to nearly USS$1 billion.
Central industrial hub sets ambitious growth target in 2025

Central industrial hub sets ambitious growth target in 2025

The central province has targeted ambitious growth of up to 10 per cent with some key strategic industrial investment projects in 2025, contributing VNĐ25 trillion (US$1 billion) to the State budget.
Demand for dragon fruit in Tiền Giang Province continues to increase

Demand for dragon fruit in Tiền Giang Province continues to increase

Dragon fruit prices in Tiền Giang Province remain high after the Lunar New Year due to increased demand from China and domestic consumption.
Data centres are attracting investors in Asia

Data centres are attracting investors in Asia

The global data centre market reached new heights in 2024, driven by the growing demand for generative AI, which has triggered a new wave of investment.

More News

US or China: Who will lead in Vietnamese Tra fish imports?

US or China: Who will lead in Vietnamese Tra fish imports?

VCN - Given that tra fish is a key export commodity for Vietnam's seafood industry, the question arises whether the United States will surpass China as the leading importer of this product in 2025.
Sustainable fashion presents promising niche market for textile manufacturers

Sustainable fashion presents promising niche market for textile manufacturers

The combination of sustainability and culture will open up more opportunities for Vietnamese textile enterprises to strengthen their position in the global market and capture the promising Nordic fashion market.
VN

VN's car industry to diversify supply chain

While China remains a significant supplier, recent trade data highlights Việt Nam’s efforts to diversify supply to meet industry demands.
Exports of agro-forestry-aquatic products down nearly 5 per cent in January

Exports of agro-forestry-aquatic products down nearly 5 per cent in January

Việt Nam’s export value of agro-forestry-aquatic products was estimated at US$5.08 billion in January, marking a 4.9 per cent decline compared to the same period last year.
Thailand reviews anti-dumping tax on Vietnamese steel

Thailand reviews anti-dumping tax on Vietnamese steel

TRAV recommended that the Việt Nam Steel Association (VSA) notify relevant local manufacturers and exporters to answer the investigation questionnaire within the prescribed deadline.
In the first 15 days of 2025, total import-export turnover reached more than US$34 billion

In the first 15 days of 2025, total import-export turnover reached more than US$34 billion

VCN - Total import-export turnover in the first half of January 2025 reached more than US$34 billion, the trade balance had a deficit of nearly US$2 billion.
Pangasius fetch record price in early 2025

Pangasius fetch record price in early 2025

Currently, larger pangasius weighing over 1.2kg, are selling at VNĐ32,440 (US$1.29) per kilogram, a record high not seen since 2022.
Việt Nam and India trade reached $15 billion in 2024

Việt Nam and India trade reached $15 billion in 2024

Trade relations between Việt Nam and India continue to flourish, with bilateral trade turnover reaching around US$15 billion in 2024.
Việt Nam

Việt Nam's port firms thrive in 2024

Strategic investments and expansions are expected to further enhance the sector’s performance.
Read More

Your care

Latest Most read
Exports witness a rise of US$1 billion in the first 15 days of 2025

Exports witness a rise of US$1 billion in the first 15 days of 2025

Compared to the same period in 2024, exports in the first half of January 2025 increased by more than 6%, equivalent to nearly USS$1 billion.
Central industrial hub sets ambitious growth target in 2025

Central industrial hub sets ambitious growth target in 2025

The central province has targeted ambitious growth of up to 10 per cent with some key strategic industrial investment projects in 2025, contributing VNĐ25 trillion (US$1 billion) to the State budget.
Demand for dragon fruit in Tiền Giang Province continues to increase

Demand for dragon fruit in Tiền Giang Province continues to increase

Dragon fruit prices in Tiền Giang Province remain high after the Lunar New Year due to increased demand from China and domestic consumption.
Data centres are attracting investors in Asia

Data centres are attracting investors in Asia

The global data centre market reached new heights in 2024, driven by the growing demand for generative AI, which has triggered a new wave of investment.
US or China: Who will lead in Vietnamese Tra fish imports?

US or China: Who will lead in Vietnamese Tra fish imports?

Given that tra fish is a key export commodity for Vietnam's seafood industry, the question arises whether the United States will surpass China as the leading importer of this product in 2025.
Mobile Version