A month ago, the six-month deposit rate was 7.4 percent per annum, but it has dropped to just 6.7 percent. Some banks are offering 4.1 percent per annum on one-month term, but some are listing the rate at up to 5.5 percent per annum. The people having idle money are not only confused by the deposit rate “matrix”, but also by the speed of interest rate changes of banks.
Before the Lunar New Year, Huyen, an accountant, deposited 500 million dong at Vietnam Prosperity Commercial Joint Stock Bank (VPBank). She was advised to deposit on long term to enjoy higher interest rates, or split into two small deposits, in which one is on short term in case there is withdrawal need, and one is on longer term for higher interest rates. For the long-term deposit, Huyen was suggested to chooaw six-month term to enjoy 7.7 percent per annum interest rate because the bank was offering 0.3 percent per annum interest rate bonus as Vietnam’s U23 Football team entered the 2018 U23 AFC final match. VPBank’s staff told Huyen that this high rate was rare. If having the need to withdraw capital, Huyen can deposit money on one month with interest rate of 5.5 percent per annum the highest level allowed by the State Bank of Vietnam (SBV) equalling to the 3-month deposit rate.
On March 12th, Huyen had another idle amount of money and came to the bank for depositing. However, she was told that the six-month deposit rate has declined to 6.7 percent per annum and rate of under three-month term is now 4.9 percent per annum. Huyen was surprised as the rates have changed so fast in just a short time. She then temporarily deposited in her account to have more time for considering.
Hoa, a retired cadre living in Nam Dong ward (Dong Da district, Hanoi) shared that she often deposits money at state-owned banks. She usually chooses one-month term in case of having the need to use. In the past, Hoa deposited at the Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), but then she moved to the Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) for 4.8 percent per annum. The rate was then reduced to 4.3 percent per annum, and just 4.1 percent per annum in the past two months. Hoa questioned the bank staff but was told that the situation is similar in other state-owned banks.
Ngoc from district 12, Hochiminh city is very pleased to tell that she was invited by her friend a bank staff to deposit money at over 8 percent per annum. After her friend analysed about the operation of banks, the security in transactions as well as the deposit security policy for people of SBV, Ngoc decided to early settle her savings book at another bank where she was offered 6.5 percent per annum interest rate to move to the bank of her friend.
The stories of Hoa, Ngoc, and Huyen are also the issue that many depositors are encountering. In the past, banks listed similar deposit rates, and if a bank increased or decreased the rate, other banks would adjust their rates. However, it is no longer a common trend as it depends on the policy of each bank.
Moreover, many banks are sensitive to social events and use interest rates as a tool to attract the attention of depositors. For example, when the U23 AFC took place, many banks took the chance to plus 0.1-0.3 percent per annum interest rate to depositors. On the Lunar New Year occasion, some banks offered bonus rate of 0.1-0.2 percent per annum for depositors, and Hochiminh city Development Bank (HDBank) added 0.7 percent per annum on its rates. Many banks also took advantage of the Women’s Day occasion to give bonus deposit rate to depositors, etc. However, after the events, the rates have been adjusted unexpectedly.
Increasingly large interest rate difference among banks
Along with promotion policies for depositors, the interest rates of banks are currently very different. The difference is even at the highest level since SBC set the interest rate ceiling seven years ago.
Survey at banks of Tri Thuc Tre showed that, joint stock banks are offering deposit rates from 4.8 percent to 5.5 percent per annum on terms of less than six months, while the rates are ranging from just 4.1 percent to 4.3 percent per annum at state-owned banks. The attractive deposit rates for terms of less than six months can be found at Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), HDBank, Vietnam International Commercial Joint Stock Bank (VIB), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Export Import Commercial Joint Stock Bank (Eximbank), An Binh Commercial Joint Stock Bank (ABBank), and Maritime Commercial Joint Stock Bank (Maritime Bank), etc.
Meanwhile, on terms of more than 12 months, the deposit rates at large banks (regardless of private or state-owned ones) are fluctuating around 6.5-7 percent per annum, but are significantly higher at smaller banks, usually above 7.4 percent per annum. Some banks are even offering rates around 8 percent per annum for large deposits, such as 7.8-8 percent per annum at Viet A Commercial Joint Stock Bank (VietABank), 8 percent per annum on 13 and 14-month terms at Southeast Asia Commercial Joint Stock Bank (SeABank), 8.3 percent per annum at Nam A Commercial Joint Stock Bank (NamA Bank), and 8.5 percent per annum at Viet Capital Commercial Joint Stock Bank (VietCapital Bank). The interest rate difference, hence, reaches up to 1.2-2 percentage points.
Concerns about customer changing banks
Returning to the story of Huyen mentioned in the above, she shared that her family’s idle money is also fairly large, but they have not yet chosen a long-term investment channel thus they temporarily deposit at bank.
Commenting about the fluctuation of deposit rates in the recent time, Dr Bui Quang Tin said that the main problem is still liquidity.
“The liquidity of the system is abundant, seen through the continuous decline of interbank rates. However, it is just a one-sided view. On the other angle, interbank transactions are not always successful because banks still limit their loans to each other. Thus, although the liquidity of the system is excessive, not all banks can access it. Bank which are unable to access cheap capital from the interbank market must raise deposit rates to draw money from the population”, said Tin about the cases when banks increased deposit rate to around 8 percent per annum.
Regarding the cases when banks lowered interest rates, Dr Tin said that, in addition to the good internal liquidity, perhaps these banks were unable to lend out and must lower interest rates to cut costs.
Talking about whether such interest rate changes could shift the cash flows among banks, Dr Tin said that it is unavoidable, but it also depends on the customer structure of each bank.
According to Dr Tin, there are three groups of depositors. The first group often deposits money for interests, and is very sensitive. If interest rates increase by 0.1 percent, this group of customers will shift their cash flows. They will choose banks with high interest rates to deposit money.
The second group is not sensitive with interest rates as their deposits are non-term. Since their purpose is to serve the needs of payment, they will choose large banks or banks with good services.
The third group deposit money on terms from three to six months. They do not focus on interest rates but attach importance to services, reputation, and incidents of the bank in the past. They will choose reputable bank and accept low interest rates in order to have peace of mind.
According to statistics, the total mobilisation fund of the banking system in 2017 was about 6,000 trillion dong, in which deposits of the population accounted for about 70 percent. Recently, some of the risks involving depositing have caused concerns for many people, such as bank staff took the advantage and withdrew depositor’s money. However, experts still believed that savings channel will continue to be a safe and effective channel. However, depositors should be more cautious when conducting transactions, especially VIP customers, in order to avoid possible pitfalls.
