However, from the business perspective of banks, this sacrifice has a significant impact on income from interest. So, is this sacrifice in vain?
“Call for help” from individuals and businesses
In 2023, Vietnam’s economy grew by 5.05%, although this is a relatively positive growth rate compared to other countries in the region, it is still lower than the government’s target of 6.5%. It is not difficult to see that businesses and individuals are heavily affected in the context of the ongoing economic recession.
In the first 9 months of 2023, according to data from SSI Research, the total after-tax profit of listed companies decreased by 15% compared to the same period last year. Although the after-tax profit in the last months of the year showed signs of recovery, businesses also faced difficulties and had to reduce profit targets. In Q3/2023, the total profit of businesses decreased by 5% compared to the same period.
Faced with pervasive difficulties, in January this year, at the Conference on the implementation of the tasks of the Banking industry in Ho Chi Minh City in 2024, representatives of the Ho Chi Minh City Business Association stood up to propose that banks continue to share difficulties with businesses by sacrificing a part of their profit to further reduce interest rates. Although the current interest rates have decreased compared to the beginning of 2023, in order to revive the market, businesses need more sharing in terms of loans.
To “respond” to the difficulties of businesses, the SBV has chosen appropriate monetary policies to support businesses in accessing capital at reasonable costs. Accordingly, the operating interest rate of the SBV has been adjusted 4 times in 2023 with a reduction rate of 0.5-2.0% per year; continuously launched economic support packages such as the 120 trillion VND package to support housing and credit packages to support forestry and aquaculture businesses…
In 2024, Ms. Bui Thuy Hang, Deputy Head of the Monetary Policy Department, said that with the credit growth target of 15%, the SBV will continue to direct credit institutions to implement credit programs according to the government’s policy, reduce lending interest rates in the future, and help enhance businesses’ access to capital in 2024.
Under the guidance of the SBV, in the past year, commercial banks have continuously reduced interest rates while launching preferential loan packages until now – when individuals and businesses are busy preparing for Tet holiday.
BVBank, a bank that is always at the forefront of offering continuous preferential loan packages to accompany customers in the year of Quy Mao. At the beginning of 2024, BVBank continues to launch a loan package with an interest rate of only 5% per year for various purposes such as home purchase, personal consumption, capital supplementation for production and business, agriculture production, and investment in machinery and equipment. The bank also lowers the borrowing interest rate to 2% per year after the preferential interest rate expires.
Or HDBank implementing a 5,000 billion VND credit package called “New loan, 0% interest rate” for new customers or existing individual customers who want to borrow more; Sacombank has implemented a 30,000 billion VND credit package for businesses with a short-term lending interest rate of 3% per year in the first month; Kienlongbank has launched a 0% interest rate loan package for individual customers in the first month.
Banks share profits with individuals and businesses
The sacrifice of lending interest rates means that banks are sharing profits with individuals and businesses. Therefore, to some extent, it affects the business results to be published for the whole year. This can be seen from TPBank, which recorded a 67% decrease in after-tax profit in Q4 and a 29% decrease in 2023 due to implementing many preferential interest rate policies that led to unsatisfactory business results.
Or Techcombank also took the initiative to lower interest rates, launch loan support packages for customers, sacrificing profit to some extent, resulting in a 10% decrease in pre-tax profit compared to 2022, reaching 22,888 billion VND.
A bank that is considered a pioneer in launching preferential interest rate packages – BVBank – also recorded a pre-tax profit decrease of nearly 72 billion VND in 2023.
PGBank had a loss of over 4.6 billion VND in Q4/2023, and the pre-tax profit for the whole year decreased by half compared to the same period due to the bank reducing lending rates for customers according to the government’s policy.
However, looking in another direction, this “sacrifice” strategy is completely effective in expanding the customer base. For example, BVBank, by launching loan packages with attractive interest rates, expanding the business network, and developing technology, the bank’s customer base has more than doubled in 2021, reaching 1.7 million customers in 2023.
Or TPBank, from 8.5 million customers in 2022, the bank exceeded 12 million customers in 2023 thanks to its digital strategy and preferential interest rates.
With the guidance of the SBV, the interest rate is forecasted to continue to decrease in the year of Giap Thin, the problem of sacrificing profit while ensuring effective business results continues to cause “headaches” for banks. However, looking at the immediate opportunities, by using long-term customer files successfully built by banks in 2023 and subsequent years, the profit sacrifice of commercial banks will be a sacrifice for the long-term future and not a sacrifice “without results”.