With credit accounting for a large proportion of their total revenue, many banks are on the verge of having lower annual profits than last year, Saigon Tiep Thi newspaper reported.
Vietcombank and Agribank are offering the lowest lending interest rate of only 14.5 per cent a year, for borrowers operating in the agriculture and rural, and export sectors.
The two major banks have set a new trend for other commercial banks such as ACB, VIB, and HDBank to cut their rates.
However, despite the reduced interest rates, many bank executives still hold a negative outlook on the market.
For instance, Nguyen Phuoc thanh, CEO of Vietcombank, said this year his bank set a credit growth target of only 15 per cent, while the figure assigned by the State Bank of Vietnam is 17 per cent.
The main reason is that local businesses will continue to face challenges for their outlets this year, he said.
Last year, Vietcombank focused most of its credit to the export sector. But many of the borrowers fell into a tough spot by the end of last year, and it continued to be on the downward trend from the beginning of this year.
Rice, seafood, cashews, and peppers -- all of them have had their prices reduced on the global market, said Thanh.
“Businesses borrowing capital from Vietcomabnk are struggling to solve the problem of finding customers,” he said.
“Consequently, even when they can access bank loans with lower interest rates, if they have no customers, exporting businesses still cannot survive.”
Thanh admitted that Vietcombank may earn lower profits from credit activity than last year.
“We will try to increase revenues from other activities, but after all, the full-year profit is likely to be affected.”
The profit pressure has burdened many banks recently.
Many small banks have also had to join the race with major banks to cut lending interest rates, while they still have to mobilize deposits at high rates.
A CEO of a Ho Chi Minh City-based bank said his institution has been mobilizing deposits at exorbitant interest rates. As a result, it is not likely for the bank to meet its profit target.
“We have planned to adjust the target this March,” he said.
The chairman of the board of members of Agribank said it would also optimize expenses in administration and operation, to ensure revenues and profits at this hard economic time.
Source Tuoi tre