Opportunities of Soft Loans for Businesses

10:05:19 AM | 12/8/2019

Following the interest rate cut at the beginning of the year, starting from August 1, many banks have continued to reduce lending rates for some priority customers.

According to experts, the lending interest rate of Vietnam is currently high compared to other countries in the region and the world, affecting cost, competitiveness and domestic demand. Therefore, when inflationary pressures and exchange rates are reduced, interest rates will then be reduced according to support growth.

Vietcombank has decided to continue reducing interest rates strongly to support businesses and individuals. Accordingly, Vietcombank applies the short-term lending interest rate in VND at a maximum of 5.5%/year, down 1.0%/year compared to the SBV's prescribed rate, applicable to all existing loans and new loans in many areas. This preferential interest rate policy is applied from 1st August 2019 to 31st December 2019.

This interest rate reduction is on a large scale, with outstanding loans equivalent to 38% of current short-term loans and accounted for nearly 20% of total outstanding loans by domestic currency of the bank.

BIDV also applies the lending interest rate schedule for priority areas at no more than 5.5% per year. To access this rate, BIDV customers must meet the standards prescribed by the SBV in the following fields: implementing export business plan; supporting industry development; serving business of high-tech enterprises according to regulations. Along with reducing the interest rate ceiling for the three priority groups, from 1st August to the end of the year, BIDV implements two credit packages, with scale of up to VND70 trillion, with interest rate reduced by 0.5%/year compared to the present.

In particular, credit package for small and medium enterprises has a scale of VND60 trillion; short-term credit package for micro enterprises, start-up enterprises has a scale of VND10 trillion.

VietinBank also reduces short-term lending interest rate in VND by 0.5%/year for a number of priority areas according to the Government's regulations. Agribank also reduces the short-term lending rate in VND for priority areas to 5.5%/year.

Not only state-owned commercial banks, but also some joint-stock commercial banks pioneered the interest rate reduction phase. According to the announcement, Techcombank is applying preferential interest rates for short-term loans for SMEs with a reduction of about 0.5% compared to the current level (about 7.5%/year).

From now until the end of 2019, VPBank will reduce short-term lending rates for SMEs who need to borrow to supplement working capital. Accordingly, interest rates will be reduced by 1%/year for unsecured loans and 0.5%/year for loans with secured assets. The policy beneficiaries are SMEs operating in the field of import and export, meeting the conditions of borrowing according to the provisions of law and VPBank.

ABBANK is currently implementing a preferential program "Instant loan - Immediately reduced interest" with disbursement limit of VND3,600 billion and interest rate from 7% per year. Accordingly, customers will enjoy an attractive 7%/year fixed interest rate in the first 6 months of the loan. This can be said to be an attractive preferential rate in the market for loans at the present time for customers who want to buy houses/land, build houses, buy cars, consume and supplement economic capital. The program is applicable to loan packages with a term of 13 months or more, from now until the end of 31st December 2019 (or until the limit of this preferential loan package expires, whichever comes first).

ACB has just announced a VND3 trillion loan package with preferential interest rates from 7.5% per year from 1st August 2019. This package includes SME 2019 incentive program and bank-to-business credit program for corporate customers.

Pre-tax profits of banks in the first half of this year were quite positive. According to SSI Securities Company, total profit before tax of Q2/2019 of 18 listed banks was VND25.2 trillion, an increase of 23.8% compared to the same period of 2018, higher than the level of 12.8% of the first quarter. Over 6 months, profit of banks reached VND51.2 trillion, up 18% and equal to 51% of the yearly plan.

Cost to income ratio (CIR) in the first half of the year was 39.8%, lower than 40.5% of the first 6 months of 2018. The loan loss provision coverage ratio of most banks is improved compared to the end of 2018.

According to experts, this is really a positive signal that commercial banks are aiming for more sustainable growth.

Quynh Anh