Vietnam deposit interest rates pick up after year in hibernation

Banks in Vietnam have been raising deposit interest rates since the end of March, and experts believe that rates will continue to climb for the rest of the year, given improved economic performance and stabilized inflation.

Last week, about 10 banks adjusted deposit interest rates both up and down, but the upward trend has dominated.

At the end of March, four commercial banks increased their deposit interest rates. Notably, private lender VPBank raised its rates by 0.1-0.2 percentage points across all terms.

Currently, the one-month online deposit interest rate (applicable to deposits under VND10 billion or $399,400) at VPBank stands at 2.4% per year. That rises to 2.7% for terms of 2-5 months, 4.2% for 6-11 months, 4.5% for 12-18 months, and 4.9% for 24-36 months.

For deposits from VND10 billion to less than VND50 billion ($2 million) and from VND50 billion or more, interest rates rose 0.1 and 0.2 percentage points, respectively.

Saigon-Hanoi Bank (SHB) also increased interest rates to 2.8% per year for 1-2 month terms, and 4.9% for 12-month terms.

Eximbank’s rates for 1-3 month terms climbed 0.3 percentage points, putting rates for 1-month terms at 3.1% per year, 3.3% for 2-month terms, and 3.4% for 3-month terms.

Saigonbank hiked interest rates for 18-month terms by 0.2 percentage points to 5.4% per year; for 24-month terms by 0.3 percentage points to 5.7%; and for 36-month terms by 0.4 percentage points to 5.8%.

Other banks following suit were National Citizen Bank (NCB), KienlongBank, and Vietnam International Bank (VIB), with an average hike of 0.1-0.3 percentage points.

Although the rate hikes have been modest and specific to certain terms, they signal that deposit rates have likely bottomed out and could increase again in the second half of the year.

This is the first time since March last year that banks have increased deposit interest rates, with rapidly expanding credit growth but falling deposits.

According to the General Statistics Office, by March 25, 2024, capital mobilization by credit institutions had decreased by 0.76% compared to the end of 2023, while at the same time last year, it had increased by nearly 1.2%. Outstanding credit debt as of March 28 rose by 0.9% compared to the beginning of the year to VND13,790 trillion ($550.8 billion).

Broker Saigon Securities (SSI) commented that deposit interest rates are unlikely to decline. It forecast that the 12-month rate at the end of 2024 will be at about 5.5% per year, an increase of 0.5 percentage points compared to 2023. Meanwhile, lending interest rates for current loans are likely to decrease by another 0.5-1 percentage points in the first half of 2024.

According to SSI, the State Bank of Vietnam still has room to make another policy interest rate cut in 2024. Currently, the lowest deposit interest rates have been set at the "Big 4" banks: Vietcombank, Agribank, BIDV, and VietinBank.

Nguyen Dinh Tung, CEO of Oriental Commercial Joint Stock Bank (OCB), said it would be difficult to reduce deposit rates further as the "Big 4" have been unwilling to budge on expectations that the economy will grow and inflation will remain stable.

"Since the middle of last year, the government has been issuing policies to promote public investment, remove legal obstacles for projects, and execute programs to encourage business development. It has also set very high requirements for the banking industry in terms of providing capital to the economy and increasing credit. All of those will prove effective this year,” he added.