Banks enjoy large interest rate margins

VietNamNet Bridg – According to the FETP’s research team, the margin between the lending and deposit interest rate is as high as 6 percent. Meanwhile, an economist says it is 4-5 percent and the State Bank affirms it is 2-3 percent.

banks, margin, profit

The margin between the lending and deposit interest rates has once again, become a hot topic for discussion. Commercial banks have been heavily criticized for enjoying big profits in the context of the economic recession.

A report by the State Bank of Vietnam showed that since August 2011, the deposit and lending interest rates have been decreasing continuously. The current interest rates are now equal to that in the period of 2006-2007.

However, while the State Bank tries to reassure the public that the interest rates are on the decrease--thereby easing the financial burden on businesses, economists do not think so.

Nguyen Xuan Thanh from the Fulbright Economic Teaching Program (FETP) said at a workshop on the monetary policy in 2011-2013 held in Hanoi on October 30, that the lending interest rates have not decreased as declared, while banks still set the big gap between the lending and deposit interest rates.

Thanh cited a survey conducted by an FETP’s research team to prove that while the deposit interest rates have decreased, the lending interest rates remain high at 12-13 percent per annum.

“With the current average deposit interest rate of 7.5 percent per annum, banks enjoy the margin profit of 6-7 percent, which is relatively high,” Thanh said, adding that in normal conditions, the margin should be 3-4 percent.

ANZ Bank, in its latest report on Vietnam economic updates released some days ago, also said 25 percent of the loans still bear the high interest rates of over 13 percent per annum.

The figure released by ANZ seems to match with the State Bank September report, in which the watchdog agency said the percentage of the loans bearing high interest rates had decreased significantly. It said that only 17 percent of the loans borne the rates of 13-15 percent, and 8 percent of the loans over 15 percent.

Meanwhile, Dr. Le Xuan Nghia, Head of the Business Development Institute (BDI), gave another figure about the margin profit – 4.3-4.5 percent.

Nghia said the conclusion has been made after he conducted a survey on the eight commercial banks which have the highest percentages of outstanding loans in the banking system.

While economists still argue about the gap between the lending and deposit interest rates, Deputy Governor of the State Bank Dao Minh Tu said the State Bank’s figure is lower than that released by the experts.

Pham Xuan Hoe, Deputy Director of the Monetary Policy Department of the State Bank, said that the gap is just 3 percent, while the average lending interest rate is 11.5 percent.

Hoe denied the fact that the margin profit of banks could be as high as 5-6 percent.

Three percent was also the figure released by Deputy Governor Nguyen Dong Tien at the government’s conference reviewing the six-month socio-economic performance.

Nevertheless, Deputy Chair of the National Finance Supervision Council Truong Van Phuoc, who was CEO of Eximbank, affirmed that the figure was even lower than 3 percent.

After asking for information from banks right at the said workshop, Phuoc said the gap is 2.8 percent only.


banks, margin, profit