Since November 2024, the wave of increasing deposit interest rates has been vibrant and heated up the market. In this context, at the end of November, the State Bank of Vietnam (SBV) had to issue a document requesting credit institutions to maintain a stable and reasonable deposit interest rate level, consistent with the ability to balance capital, the ability to expand healthy credit and the ability to manage risks, contributing to stabilising the monetary market and market interest rates.
In addition, the SBV required banks to continue to resolutely and effectively implement solutions, simplify lending procedures, increase the application of information technology and digital transformation in the lending process, and strive to reduce lending interest rates to support businesses.
Deposit interest rates fluctuate in opposite directions
Observing the market, it can be seen that after simultaneously increasing deposit interest rates in November, a number of commercial banks have adjusted their interest rates down in December after receiving a “reminder” document from the operator. However, in general, the upward trend is still dominant.
For example, according to the interest rate listing table of banks on December 10, while many banks increased deposit interest rates, some banks suddenly reduced interest rates sharply. Specifically, DongABank increased interest rates to 6.1%/year for terms of 18 months or more; 1-2-month terms will have an interest rate of 4.1%/year, and 3-5-month terms will have an interest rate of 4.3%/year. VIB Bank also increased by a maximum of 0.2 percentage points compared to before, with a 1-month term of 3.5%/year, and a 6-9-month term of 4.7%/year.
After many consecutive increases in November, ABBank had the highest mobilisation interest rate of up to 6.3%/year for a 24-month term, 6.2%/year for a 15-18-month term. In early December, this bank sharply reduced the deposit interest rate for the above terms to the highest level of only 5.7%/year, but it increased the deposit interest rate for a 12-month term to 6%/year. Next, ABBank continued to increase the interest rate for a series of terms from 3-12 months with an increase of 0.2-0.25%/year, becoming the first bank to increase interest rates twice in December.
KienlongBank also reduced interest rates for all deposit terms, after increasing the interest rate for 1-6-month terms by 0.2%/year at the end of last month. According to the latest online interest rate schedule for individual customers, the interest rate for 1-4-month terms at KienlongBank decreased sharply by 0.6%/year to 3.3%/year, the 5-month term decreased by 0.4%/year to 3.5%/year. Interest rates for 6-36-month terms decreased by 0.4%/year, and the interest rate for 60-month terms decreased by 0.3%/year.
Similarly, BacABank adjusted the interest rate for 1-month term down by 0.15 percentage points to 3.7%/year, while other terms decreased by 0.1 to 0.15 percentage points. The highest interest rate at this bank is 5.95%/year for terms of 18 months or more. Recently, MB Securities Company (MBS) has made some forecasts about the development of savings interest rates from now until the end of 2024.
According to MBS, after about two months of stagnation, mobilisation interest rates have started to increase again in November with 16 banks, including large banks such as Agribank, Techcombank, and MB, increasing savings interest rates by 0.1%-0.7%/year. “This upward trend is expected to continue until the end of this year in the context of credit growth increasing nearly twice as fast as capital mobilisation growth,” MBS forecasts.
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Customers transact at a SeABank branch. (Photo: Viet Phong) |
Efforts to stabilise lending rates
Data updated to the end of November shows that the average 12-month interest rate of the commercial bank group reached 5% (0.14 percentage points higher than at the beginning of the year). Meanwhile, the interest rate of state-owned commercial banks remained unchanged at 4.7%/year, 0.26 percentage points lower than at the beginning of the year.
MBS analysts believe that the recovery of credit growth, in the context of production and investment accelerating more strongly in the last months of the year, will put some pressure on the liquidity of the system and may lead to an increase in input interest rates. MBS forecasts that the 12-month deposit interest rate of major commercial banks will likely increase by 20 basis points (0.2%), fluctuating around 5.1% - 5.2% by the end of 2024.
Meanwhile, the group of analysts at VDSC Securities Company assessed that it is necessary for banks to increase input interest rates in the context of high demand for loans from businesses at the end of the year. This shows the flexibility of banks in ensuring capital sources to serve the economy while maintaining safety and liquidity for the system.
On the other hand, increasing deposit interest rates is also a way for banks to compete with other investment channels. According to some economic experts, in the context of economic fluctuations, savings are still a safe choice for investors who prioritise capital preservation, because with a mobilisation interest rate of around 6%/year, saving not only ensures a positive real interest rate, but also maintains high liquidity.
However, the increase in input interest rates also raises concerns that it will cause lending interest rates to increase. Meanwhile, implementing the government's direction, the State Bank of Vietnam requires banks to strive to reduce lending interest rates to support businesses. According to Associate Professor, Dr Dinh Trong Thinh, in 2024, thanks to cost reduction, the banking system has reduced lending interest rates by about 0.7%. Thinh commented that the opportunity to further reduce interest rates in the coming time is very difficult when this year is already the “bottom” of lending interest rates.
According to statistics from the State Bank of Vietnam as of December 7, credit growth has reached about 12.5%. This growth rate is quite positive compared to the same period in 2023 (at this time in 2023, it has only increased by about 9%). The total outstanding debt of the economy up to now is about 15,300 trillion VND and capital mobilisation is about 14,800 trillion VND, the growth rate of capital mobilisation is about 7.36%.
“Thus, the growth rate of outstanding debt is quite high compared to the growth rate of capital mobilisation. This shows that, in addition to the issue of capital mobilisation from the economy of commercial banks, the State Bank has had many solutions to support liquidity and capital for businesses through capital support for commercial banks through management tools”, Deputy Governor of the State Bank Dao Minh Tu emphasised.
Governor of the State Bank Nguyen Thi Hong also acknowledged that the pressure on exchange rates from the international market, combined with the pressure on capital supply from the credit institution system to the economy is still large, which will make further interest rate reduction more difficult. Because reducing interest rates will affect the exchange rate.
In the coming time, the SBV will continue to closely follow market developments, domestic and foreign economic situations to proactively and flexibly manage monetary policy, in accordance with macroeconomic developments, inflation, meeting capital needs for the economy, directing credit to production, business, priority sectors, and economic growth drivers under the direction of the government and the prime minister.
At the same time, SBV will strictly control credit in areas with potential risks and create favourable conditions for businesses and people to access bank credit capital. Notably, the State Bank will continue to direct credit institutions to reduce costs to reduce lending interest rates.
