Borrowing trends reflect weak demand

Talking to VIR, a TPBank representative revealed that for the past few weeks, deposit customers have been sparse. Term deposits, when mature, are transferred to other banks because interest rate is too low, and it is anticipated that this is not the bottom yet.

“Some customers even confess that despite economic fluctuations, they are closing their savings accounts to be ready to buy real estate or even gold for investment,” the representative said. “Previously, customer loans for buying cars were quite common, but now, personal consumer loans are almost inactive with only a few customers opening cards, while business customers are also hibernating.”

According to the State Bank of Vietnam, credit growth as of August 30 was 5.56 per cent, much lower than the target of 14.0 per cent for the entire year.

“This trend reflects weakened credit demand and investment activities due to the sluggish economy,” said Dorsati Madani, senior economist at the World Bank in Vietnam.

Meanwhile, Vietcombank has just implemented a policy for individual customers to borrow money to repay their loans early at other banks, with an interest rate for loans starting at 6.9 per cent per annum. The policy took effect immediately after Circular No.06/2023/TT-NHNN became effective on September 1.

Accordingly, customers can borrow with a loan period of up to 30 years (but not exceeding the remaining loan term at the bank they are borrowing from) with a maximum loan amount of 100 per cent of the principal balance of the loan at the bank they are borrowing from. Customers are granted a maximum grace period of 24 months and are in compliance with Vietcombank’s regulations.

Similarly, BIDV has also announced its policy to individual customers to borrow money to repay their loans early at other banks with interest rates starting at 6 per cent per annum, along with several incentives. BIDV’s leadership said this is a timely solution to reduce interest payment burdens for customers with high-interest loans.

According to Truong Thanh Duc, director of ANVI Law, borrowing from one bank to repay a loan at another bank is a necessary move that meets market demand.

“The transfer of debt from one bank to another was previously regulated in another circular, but it only applied to loans for production and business purposes, not for personal life needs. With Circular 06, banks are allowed to consider and decide on customer loans to repay loans at other banks for the purpose of serving personal life needs such as buying houses or cars,” Duc said.

“However, getting a loan to repay a loan early is not easy due to many accompanying strict conditions, and the real effectiveness of the loan is also a crucial issue,” he added.

Regarding liquidity, Tran Trung Kien, an analyst at VNDirect, believes there have been some positive signs from real estate businesses actively repurchasing corporate bonds before maturity. This helps reduce the value of maturing bonds in the second half of 2023 and into 2024 by 12 and 10 per cent respectively compared to before the repurchase, thereby reducing the pressure of bond maturity, especially for real estate businesses facing difficulties in cash flows.

“In the first six months of 2023, we saw a slight decrease in the risk of payment default by real estate businesses, as they extend the bond maturity period and extend bank debts,” Kien said.

He admitted that the liquidity of real estate businesses is still a concern, as many businesses are slow to pay interest and principal on corporate bonds due to difficulties in capital recycling channels along with sharply reduced sales volumes due to market sentiment.