The weekly monetary market report released by SSI Securities Corporation (SSI) Research said that during the week till October 14, the State Bank of Vietnam (SBV) issued 87 trillion dong of seven-day bills, the interest rate of 2.25 percent per year while up to 90 trillion dong of matured bills. Open market operation (OMO) did not generate any new transactions, only settled 495 billion dong to buy the term of the previous week, bringing the OMO balance to zero. In general, SBV net injected by 2.505 trillion dong on the open market.
Interbank liquidity was still very abundant. Interest rates continued to fall sharply to below two percent with both overnight and one-week terms. Specifically, the interbank offered rates of dong decreased by 32 basis points (bps) for overnight and 38bps for the one-week term, to 1.68 percent per year, and 1.92 percent per year respectively. At the current level, the dong interest rates on the interbank were much lower than the USD interest rates, the overnight rate difference of VND/USD changed to -24bps after 14 months of positive maintenance.
This interest rate difference was likely to soon return to zero when the US Federal Reserve (Fed) continued to reduce the interest rate by 0.25 percent per year in the last meeting in October. Currently, the probability that Fed would cut interest rates to 1.5 percent to 1.75 percent per year had been higher to nearly 90 percent (due to Bloomberg). According to SSI Research, with abundant liquidity and positive market sentiment, interest rates on interbank would remain around 1.6 percent to two percent per year and not exclude the possibility that SBV would reduce bill interest rates the fourth time shortly.
However, in the market one, deposit rates remained at 4.3 percent to 5.5 percent per year with term of fewer than six months, 5.5 percent to 7.5 percent per year with term of six to under 12 months, and 6.4 percent to 8.1 percent per annum with terms of 12 to 13 months.
Analysts of SSI Research said that the high mobilisation demand for financing credit at the end of the year and for meeting the roadmap to reduce the ratio of short-term capital to 30 percent for medium and long-term loans of SBV would make interest rates for long terms hard to reduce. The differentiation would be stronger, widening the interest rate gap between banks.
In fact, in the current market, deposit rates had a considerable differentiation. In terms of less than six months, big banks, like Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), and so on, only mobilised from 4.5 percent to 5.2 percent per year, most small banks listed at ceiling prices, at 5.5 percent or 5.4%. For six months to less than 12 months, interest rates at large banks were only 5.5 percent to 6.8%, small banks, or other large private joint-stock banks having ‘traditional’ high-interest rates available were willing to pay from 6.9 percent to eight percent per year. For a long term of 12 months or more, significant interest rates were still seven percent per year; other banks had been listed popularly from 7.5 percent or more, reaching the highest at nine percent per year.
Despite such strong differentiation, interest rates did not entirely determine the amount of money deposited in banks. Over the first nine months of this year, Vietcombank, BIDV, Agribank VietinBank, Techcombank, Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), etc, were still the banks with the highest capital mobilisation, accounting for about 60 percent of the total capital mobilisation of the banking system, having high deposit growth. While banks had very high-interest rates, deposit growth was still slow, even with banks paying interest to 8.5%, but only after nine months, the deposit increased by 1.3 percent compared to the end of 2018.
