Are bank deposits still a safe haven in 2024?

Deposits are pouring into banks

“I choose to save money in the bank because this is a safe channel with low risk at the present time. At the same time, due to limited capital, investing in other business activities is quite difficult for me. Regarding the interest rate, at the present time, I still find it acceptable compared to using that capital to invest in the stock market or other business activities.”

That is what Ms. Nguyen Ngan (Cau Giay district, Hanoi) shared with Nguoi Dua Tin when asked about the reason for choosing to invest in bank deposits.

Mr. Dinh Hien (Thach That district, Hanoi) also shared that although he wishes to be able to invest in other areas besides deposits. However, in difficult economic times, businesses have not recovered and stabilized, investing anywhere must be calculated, even accepting high risks like now, deposits are still the top choice.

Finance - Banking - Are bank deposits still a safe — In 2023, bank deposits continued to climb despite deposit interest rates constantly hitting rock bottom.

In fact, in the last months of 2023, interest rates at banks have been continuously adjusted downward. Even savings interest rates at the group of 4 state-owned banks, Vietcombank, Vietinbank, BIDV and Agribank, have all been adjusted down sharply from 0.2 - 0.4%/year, bringing the 1-month mobilization rate down to the lowest level of only 2.2%/year.

However, people still choose to deposit money in banks. According to the State Bank of Vietnam, the amount of deposits of residents at credit institutions increased by VND 15,935 billion in September 2023, reaching a record of over VND 6,449 trillion. This increase is 11 times higher than the same period in 2022.

Compared to the end of 2022, the total amount of deposits from residents increased by more than VND 583,000 billion, equivalent to 9.95%. Deposits from economic organizations increased by VND 217,000 billion, to nearly VND 6,232 million billion. This increase is double the same period in 2022.

The amount of deposits from businesses increased by nearly VND277,000 billion, equivalent to 4.65%, twice the growth rate in the same period in 2022. In total, deposits from residents and economic organizations in the banking system by the end of the third quarter reached VND12.68 million billion, an increase of nearly 7.28% compared to the beginning of the year.

Don't put all your eggs in one basket.

Explaining the reason why the amount of bank deposits is constantly increasing despite the fact that interest rates are constantly hitting rock bottom, Associate Professor Dr. Nguyen Huu Huan from Ho Chi Minh City University of Economics said: “Other investment channels all contain many risks. Stocks fluctuate, not increasing as expected. Real estate is frozen. Gold prices are currently very high, so investors need a safe “haven”. Therefore, they choose to deposit money in banks even though interest rates are falling sharply.”

Sharing the same opinion with Mr. Huan, Associate Professor, Dr. Tran Hung Son - Institute for Banking Technology Development Research, University of Economics and Law, Ho Chi Minh City National University, said that instead of struggling to find other investment channels with high risk and low liquidity at the present time such as stocks, real estate, etc., saving will be safer for investors.

In addition, current savings interest rates are still higher than expected inflation, so this is still an attractive channel for investors.

Experts agree that there is not much room for further reduction in deposit interest rates due to the need to ensure positive real interest rates. In addition, the State Bank will seek to absorb some of the money to avoid too low interest rates causing speculative pressure on exchange rates when USD interest rates remain high.

At the same time, avoid the interest rate difference between VND and USD being too low, leading to foreign investors continuing to withdraw capital from Vietnam to invest in the US, enjoying higher interest rates and ensuring exchange rate safety.

Regarding the situation of bank deposits in 2023, Mr. Huan commented: “Depositing money in banks is to wait for signals from other investment channels. The bank deposit channel will probably only be maintained in the early stages of 2024. With the improvement of other channels, the bank deposit flow will likely shift in the second half of 2024.”

According to Mr. Huan, the investment rule is “don’t put all your eggs in one basket”. Diversifying investment channels and shifting cash flow from low-return to high-return areas is inevitable.

Mr. Son also said that investment diversification is a general principle in the field of financial investment. This is especially important in the context of high uncertainty. Although the economy is forecast to improve in 2024, difficulties and challenges still remain, so investment diversification next year is still necessary.

However, diversifying investment channels also depends on the risk appetite and financial capacity of each investor. Those who want to be safe will continue to deposit money in banks, while those who are adventurous will choose to expand their investment channels .

Source