Although deposit rates were still under pressure to increase, lending rates were forecast to remain stable at the end of this year.
Deposit rates still increased
At the press conference to announce the results of banking activities in Q3/2019, the representative of the State Bank of Vietnam (SBV) assessed that the interest rate level remained stable. However, in the first nine-month macroeconomic report of 2019, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) Training and Research Institute stated that deposit interest rates increased slightly in Q3/2019. Accordingly, by the end of August, the mobilisation rates were recorded as the highest of 10 percent (five-year deposit certificates of some small and medium-sized commercial banks), higher than the highest level of 8.5 percent to 8.6 percent at the beginning of the year.
There were three reasons for deposit rates to increase in the last three months. Firstly, banks stepped up capital mobilisation to meet the demand for credit growth at the end of the year. Secondly, banks mobilised capital to meet the regulations to gradually reduce the use of short-term capital for medium- and long-term loans. Thirdly, the increasing competitive pressured from the corporate bond market.
Currently, mobilisation rates in the market were divided into three main groups. The first group was large state-owned commercial banks with the lowest deposit rates in the market. Specifically, the deposit rates for terms of less than six months was 4.5 percent to five percent per year; six-month to nine-month term was at 5.5 percent to 5.6 percent per year; 12-month term or more was 6.8 percent to seven percent per year.
The second group was large joint-stock banks such as Asia Commercial Joint Stock Bank (ACB), Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), etc. currently applying deposit rates for terms of less than six months from 5.3 percent to 5.5 percent per year; six-month term was 6.5 percent to 6.8 percent per year; nine-month term was at 6.6 percent to seven percent per year; 12-month term was seven percent to 7.5 percent per year; 18-month term was 7.4 percent to 7.8 percent per year; 24-month term or more was 7.7 percent to eight percent per year.
The third group was small joint-stock banks currently having the highest deposit rate on the market recently. Accordingly, the interest rates for terms of less than six months were pushed up to the ceiling of 5.5 percent per year by these banks; while the highest six-month term was 7.5 percent per year. The highest deposit rate of nine-month term was eight percent per year. The highest deposit rate of 12-month term was 8.3 percent per year. The highest deposit rate of 18-month was 8.5 percent per year; 24-month term or more was the highest 8.6 percent per year. Even the interest rate of online deposits was 0,1 percent added.
Not only raising deposit rates, but many banks also issued certificates of deposits with high interest rates, such as Viet Capital Commercial Joint Stock Bank (Viet Capital Bank) paying interest rates up to 10.2 percent per year for 60-month deposit certificates.
Because of this fact, SBV reminded the move of raising interest rates of credit institutions and affirmed that they would follow to take measures to strictly deal with violations of the provisions of law and the direction of SBV.
Hard to reduce interest rates simultaneously
In fact, after the aforementioned corrective move by SBV, deposit interest rates stopped rising, but there had been no sign of decline. Even deposit rates were forecast to increase slightly in the last months of this year, especially long-term deposit rates.
A banking expert said that deposit rates were under much pressure. At first, banks had to step up capital mobilisation to meet the higher credit growth demand in the last months of the year.
Besides, SBV was proposing to continue reducing the ratio of using short-term capital to medium and long-term loans according to the roadmap to 30 percent in the next two to three years (Draft Circular replaced Circular 36/2014/TT-NHNN). Further tightening of the use of short-term capital for medium and long-term lending increased the pressure on medium and long-term capital mobilisation, pushing the deposit interest rate level up.
Also, the domestic exchange rate was under pressure because the US dollar was still tending to strengthen, while the Chinese Yuan had fallen sharply due to the US-China trade war. In this context, credit institutions were forced to maintain high mobilising interest rates to attract the dong depositors.
Although deposit rates were under pressure, lending rates were forecast to remain stable as deposit rates rise mainly concentrated in small banks and also fall into medium and long-term while deposit rates of state-owned banks (which account for 50 percent of the mobilisation and lending market share) remained stable at low levels.
In particular, the fact that big state-owned commercial banks continue to reduce lending rates was also a sure anchor for interest rates to not increase.
In addition, the SBV’s decision to reduce 0.25 percent of the central bank’s interest rates recently had been expected to support liquidity and help stabilise lending rates.
SSI Securities Corporation said that the spread of interest rate from market two to market one trend in Q4/2019 would be slow, or not yet happening. It meant that the lending interest rate level was likely to be stable as at present, but it was challenging to decrease like the interbank interest rate.
However, many experts still expected that, if some big banks have big profits as forecast, they would launch credit packages with preferential lending interest rates to support businesses in the last months of this year.
