The latest updates from commercial banks show that deposit interest rates for many terms continue to increase. This trend has been going on for the past few months, leading to many concerns about whether lending interest rates will keep pace and whether cheap capital will become scarce.
Attract idle cash flow
In the first two days of August, a number of banks continued to adjust deposit interest rates to attract idle cash flows while other investment channels have not yet clearly recovered.
Specifically, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) has sharply increased online deposit interest rates for many terms. Of which, the interest rate for 6-month deposits has the strongest increase of 0.8%/year, up to 4.9%/year. The interest rate for 7-11-month deposits has also increased from 0.6-0.7%/year to 4.9%/year.
Interest rates on deposits with terms of 12 months or more listed by Sacombank increased by 0.5%/year compared to before, to 5.4%/year for deposits of 12-13 months; 5.5-5.7%/year for deposits of 15-24 months.
In addition, deposits with terms under 6 months all increased from 0.1-0.3%/year compared to the previous interest rate schedule, currently fluctuating from 3.3-3.6%/year.
Not only Sacombank, Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank) has also just slightly increased from 0.2-0.3%/year online mobilization interest rates for short terms, bringing the interest rate for terms from 1-5 months to 3.55%/year; for terms from 6 months to 5.1%/year.
Vietnam Bank for Agriculture and Rural Development (Agribank) has joined in the game by slightly increasing online deposit interest rates. Currently, Agribank lists deposit interest rates for less than 6 months at 1.8-2.2%/year, and for 6-9 months at 3.2%/year, an increase of 0.2-0.3%/year compared to before.
Previously, in July, a series of banks adjusted their deposit interest rates up, commonly from 0.3-0.7%/year, including: An Binh Commercial Joint Stock Bank (ABBank), Vietnam Prosperity Joint Stock Commercial Bank (VPBank), Vietnam International Commercial Joint Stock Bank (VIB), Saigon - Hanoi Commercial Joint Stock Bank (SHB), Vietnam Joint Stock Commercial Bank for Industry and Trade (BVBank), Military Commercial Joint Stock Bank (MB)...
Assessing this fluctuation, Dr. Nguyen Tri Hieu, an economic expert, said that banks adjusting deposit interest rates is an appropriate move to balance the profitability of several other investment channels such as gold, foreign currency... to attract idle money from the people.
According to the latest statistics from the State Bank, deposits from residents to credit institutions increased sharply to nearly VND6.7 quadrillion as of the end of March, up 2.2% compared to the end of last year.
Is cheap capital scarce?
The upward trend in deposit interest rates began at the end of March and has become more evident recently.
Dr. Nguyen Tri Hieu commented that the deposit interest rate may increase again in the second half of this year, leading to an increase in lending interest rates.
"Increasing interest rates indicate stronger economic activity as individuals and businesses borrow more. Credit demand increases, forcing banks to raise interest rates to attract deposits to meet customers' capital needs," Mr. Hieu shared.
On the other hand, the expert said that the increase in deposit interest rates could also be due to the increase in bad debt. When the loan capital does not return to the system, banks have to mobilize new capital to pay for old deposits that have matured. Increasing deposit interest rates to attract new cash flow may be a necessary measure to ensure liquidity, but it also pushes up borrowing costs because banks need to maintain a profit margin of 3-4%.
Sharing the same view, experts from KB Securities Vietnam (KBSV) forecast that lending interest rates have hit rock bottom and are likely to remain flat or increase slightly by the end of the year. Similarly, Vietcombank Securities Company believes that deposit interest rates will increase by about 0.3-0.5% in the third quarter and the upward pressure will continue in the fourth quarter, with interest rates expected to increase by 0.5-1% for the whole year.
In fact, "cheap capital" is still being supplied to the economy by banks with a series of preferential credit packages.
For example, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) is offering preferential loans to individual customers for production and business purposes with interest rates from 3.9%/year for short-term loans and from 6.5%/year for long-term loans to supplement working capital or repay debts early at other credit institutions.
Or for customers borrowing money to buy a house, VIB is offering 30,000 billion VND in preferential loans with 3 fixed interest rate packages for 6, 12 and 24 months from 5.9%/year. Vietnam Maritime Commercial Joint Stock Bank (MSB) also offers preferential home loans with interest rates from 4.99%/year, but only applies in the first 3 months...
Associate Professor, Dr. Dinh Trong Thinh, an economic expert, said that with the State Bank's stable monetary policy, encouraging commercial banks to optimize costs to bring the most beneficial lending interest rates to people and businesses, lending interest rates are expected to continue to decrease or at least remain stable in the final period of this year.
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