Techcombank's transaction office in Hanoi. Techcombank has recently increased its savings rate by 0.3-0.45 percentage points this year. (Photo courtesy of Techcombank) Hanoi (VNS/VNA) - Experts forecast that bank net interest margins(NIM) will decline as inflation rises next month.
Vietnam'sconsumer price index in the first five months of the year edged up 2.25 percentyear-on-year while core inflation rose by 1.1 percent, according to the GeneralStatistics Office (GSO).
Expertsare concerned it will be difficult for the country to meet theGovernment's inflation target of 4 percent this year due to increasing pricesof oil and basic commodities in the wake of the war between Russia and Ukraine.
AViet Dragon Securities Corporation (VDSC) representative told Vietnam News the oil marketwas continually overheating after reaching 102 USD per Brent oil onaverage in the first five months of 2022, up 62 percent from the same periodlast year. VDSC's analysts forecast two scenarios for the country's inflationthis year.
"Inthe positive scenario, if the oil price remains at around 120 USD per barrel inthe remaining months of the year, the product's price will average at 113 USD perbarrel in the whole of 2022, up more than 60 percent against 2021. At the oilprice level, we forecast Vietnam's inflation will be 4.5 percent in 2022 astransportation cost will make up 2 percentage points to the country'sinflation rate," the representative said.
"However,in the pessimistic scenario, inflation will reach 5 percent if the gasolineprice hits a record high of 150 USD per barrel as in 2008."
Accordingto Nguyen The Minh, analysis director of Yuanta Vietnam Securities Company'sindividual customer division, rising inflation will directly affect banksas they have to raise deposit interest rates to make them higher than therising inflation rate to attract depositors and compete against otherinvestment channels such as real estate and securities.
Meanwhile,banks cannot raise the lending interest rate correspondingly or even have tokeep the rate unchanged to support the economic recovery as directed by thecentral bank.
Themove will affect banks' NIM and profit growth adversely, Minh said.
TranThi Khanh Hien, analysis director of VNDirect Securities Company, forecast adeclining trend in banks' NIM, explaining it would be difficult for banksto cut saving rate despite a stable lending rate as they still have to luredeposits to ensure liquidity and meet the central bank's requirement on capitaladequacy ratio.
Industryinsiders are also concerned as bank profits currently rely on about70 percent of credit. A decrease in NIM, therefore, will affect profits.
Depositinterest rates are under increasing pressure due to rising inflation andstronger-than-expected credit growth.
Bythe end of April, the Vietnamese dong interest rates tradedbetween banks on the interbank market declined by 0.5-0.7 percentage points peryear but increased again in early May 2022. Specifically, the interbankinterest rates in early May 2022 were 0.1-0.4 percentage points per year higherthan the rates at the end of April on short terms of less than one month.
Notonly small-sized banks, but large-sized banks, which previously always keptdeposit interest rates at very low levels, have recently also adjusted theirrates up as a move to increase the competition in attracting depositors.
Techcombank,for example, has recently increased its savings rate by 0.3-0.45 percentagepoints per year, lifting the highest rate at the bank to 6.5 percent per year.The surge was the bank's strongest interest rate adjustment in more than sixmonths. In previous adjustments, Techcombank's rate usually increased slightlyby about 0.1-0.2 percentage points.
TranDuc Anh, Director of the KBSV Securities Company's Macroeconomics and MarketStrategy Division, forecast that interest rates for long-term deposits oflarge-sized banks will increase by about 0.5 percentage points./.
Expertsare concerned it will be difficult for the country to meet theGovernment's inflation target of 4 percent this year due to increasing pricesof oil and basic commodities in the wake of the war between Russia and Ukraine.
AViet Dragon Securities Corporation (VDSC) representative told Vietnam News the oil marketwas continually overheating after reaching 102 USD per Brent oil onaverage in the first five months of 2022, up 62 percent from the same periodlast year. VDSC's analysts forecast two scenarios for the country's inflationthis year.
"Inthe positive scenario, if the oil price remains at around 120 USD per barrel inthe remaining months of the year, the product's price will average at 113 USD perbarrel in the whole of 2022, up more than 60 percent against 2021. At the oilprice level, we forecast Vietnam's inflation will be 4.5 percent in 2022 astransportation cost will make up 2 percentage points to the country'sinflation rate," the representative said.
"However,in the pessimistic scenario, inflation will reach 5 percent if the gasolineprice hits a record high of 150 USD per barrel as in 2008."
Accordingto Nguyen The Minh, analysis director of Yuanta Vietnam Securities Company'sindividual customer division, rising inflation will directly affect banksas they have to raise deposit interest rates to make them higher than therising inflation rate to attract depositors and compete against otherinvestment channels such as real estate and securities.
Meanwhile,banks cannot raise the lending interest rate correspondingly or even have tokeep the rate unchanged to support the economic recovery as directed by thecentral bank.
Themove will affect banks' NIM and profit growth adversely, Minh said.
TranThi Khanh Hien, analysis director of VNDirect Securities Company, forecast adeclining trend in banks' NIM, explaining it would be difficult for banksto cut saving rate despite a stable lending rate as they still have to luredeposits to ensure liquidity and meet the central bank's requirement on capitaladequacy ratio.
Industryinsiders are also concerned as bank profits currently rely on about70 percent of credit. A decrease in NIM, therefore, will affect profits.
Depositinterest rates are under increasing pressure due to rising inflation andstronger-than-expected credit growth.
Bythe end of April, the Vietnamese dong interest rates tradedbetween banks on the interbank market declined by 0.5-0.7 percentage points peryear but increased again in early May 2022. Specifically, the interbankinterest rates in early May 2022 were 0.1-0.4 percentage points per year higherthan the rates at the end of April on short terms of less than one month.
Notonly small-sized banks, but large-sized banks, which previously always keptdeposit interest rates at very low levels, have recently also adjusted theirrates up as a move to increase the competition in attracting depositors.
Techcombank,for example, has recently increased its savings rate by 0.3-0.45 percentagepoints per year, lifting the highest rate at the bank to 6.5 percent per year.The surge was the bank's strongest interest rate adjustment in more than sixmonths. In previous adjustments, Techcombank's rate usually increased slightlyby about 0.1-0.2 percentage points.
TranDuc Anh, Director of the KBSV Securities Company's Macroeconomics and MarketStrategy Division, forecast that interest rates for long-term deposits oflarge-sized banks will increase by about 0.5 percentage points./.
VNA
