Deposit interest rates surge, approach 9% a year

After breaking the 8% threshold two weeks ago, deposit interest rates in many banks have exceeded 8.5% and are approaching 9%.

The deposit interest rate competition intensified after Saigon Commercial Bank (SCB) offered higher interest rates in the aftermath of the arrest of realty tycoon Truong My Lan, chairwoman of Ho Chi Minh City-based property developer Van Thinh Phat Group, and a run on SCB deposits.

The bank has clarified the arrest of Lan does not affect its business as she does not hold any executive role at the bank. The deposit withdrawals also seemed to have been triggered by news of the sudden death of Nguyen Tien Thanh, chairman and CEO of Tan Viet Securities. Thanh, 49, was an independent board member of SCB.

Last Saturday, SCB raised its deposit interest rates by one percentage point, pushing it as high as 8.85% a year for deposit terms of 36 months. Then on Wednesday, the bank offered coupons of additional 0.5 percent interest, pushing the highest deposit interest rate to 8.92%, the Vietnamese banking system's highest level.

The lender also offered deposit certificates with interest rates of up to 8.9% a year for deposit terms of 24 months.

Other banks have also raised their interest rates in response. ABBank has deployed a promotion program with interest rates of up to 8.5% a year for deposit terms of 12 months and 8.6% a year for deposit terms of 15 months. Cash gifts equivalent to 0.3-0.8% a year are offered for term deposits of VND100 million ($4,140) or more.

Kienlongbank has increased its maximum deposit interest rates to 8.6% a year for term deposits of at least one year, while SeABank is offering 8.55% a year for 18-month term deposits between October 3 and October 14.

Bac A Bank, meanwhile, has set interest rates of 8.4% for deposits of at least VND1 billion ($41,450) and deposit term of 18 months.

VPBank has also announced an interest rate of 8.2% for deposits of at least VND300 million ($12,435) with deposit term of 36 months.

Maritime Bank (MSB) has pushed up its interest rate to over 8% a year since late September.

Vietcombank Securities, a brokerage house, said many joint stock banks increased their interest rates by 0.9-1.1 percentage points early October, with small and medium size banks increasing it by 1.5 percentage points. The brokerage anticipates the interest rate to hike by 1.5-2 percentage points this year.

Analysts at Vietcombank Securities think the deposit rates may have already reached their peak at small-size and medium-size commercial banks because they have equalled the peak in 2019, the pre-pandemic period. As many commercial banks aim for net interest margin (NIM) of 3% on average, it is expected that the lending rates could reach 12% a year for loans with terms of at least one year.

Previously, on September 23, the State Bank of Vietnam had raised the deposit rate ceiling, triggering local banks to raise their deposite rates en masse.