Vietnam banks enter new phase of deposit rate cuts

Vietnamese commercial banks, led by state-controlled majors, have begun a new round of lowering deposit interest rates amidst tepid credit growth.

Hanoi-based Vietnam Commercial Bank for Industry and Trade (VietinBank) is the latest state-controlled commercial bank to slash its deposit rates by 10-20 basis points across the board.

As such, its interest rate for one- and two-month deposits has gone down to 1.7% per annum. The highest rate offered by VietinBank is 4.8% for deposits of 24 months or more.

Similar cuts have been seen at other “Big 4” banks – BIDV, Agribank and Vietcombank – who account for more than 40% of total deposits in the country’s banking system. All four of them have capped their deposit rates at 4.7-4.8%, an all-time low in Vietnam.

Private banks like PGBank, ACB, MB, and SCB have followed the lead of the “Big 4.” Cuts of 10-30 basis points have become common. Around a dozen banks, mostly small-sized ones, are offering rates higher than 5% for 12-month deposits.

Meanwhile, several banks are offering unusually high rates for large-size deposits. PVcomBank has a 10% per annum rate for 12-13-month deposits of at least VND2 trillion ($44.75 million).

HDBank is offering 8.1% for 13-month deposits of VND500 billion ($11.19 million) and more.

According to central bank data, total outstanding loans had shrunk 0.72% as of the end of February against the beginning of this year, indicating weak credit demand amid a low season.

In a recent report, MB Securities Co. analysts said they anticipated deposit rates to bottom out in the first quarter of this year as credit growth may make a U-turn and rebound later this year.

Rates on 12-month deposits at major commercial banks are expected to increase 25-50 basis points to the 5.25-5.5% territory in 2024, they said.