A series of banks lower savings interest rates

Race to adjust interest rates down

After increasing interest rates quite a bit before and right after Tet to attract idle money, recently, many banks have reduced deposit interest rates, mainly for short terms.

Specifically, VPBank has applied a new deposit interest rate schedule from March 30, adjusting down many terms. Accordingly, it has reduced 0.2 percentage points for terms under 6 months and from 12-36 months, reduced 0.3 percentage points for terms 6-7 months and reduced 0.4 percentage points for terms 8-11 months. This is the third consecutive reduction in deposit interest rates in the past two months by VPBank.

VIB Bank also adjusted its interest rates twice in March. Accordingly, it reduced the interest rates by about 0.3 - 0.5 percentage points compared to January for terms of 1-3 months to 5-5.1%. Terms of 6 months or more also decreased by 0.2 - 0.4 percentage points. Currently, the interest rate for a 6-month term is 6% to 6.3% depending on the amount of deposit.

At MB Bank, interest rates for many short terms decreased by 0.1 to 0.2 percentage points compared to early February. For example, the interest rate for 6-month terms decreased by 0.2% to 5.5%. Meanwhile, the interest rate for 12-month terms remained unchanged at 7.2%.

In the state-owned commercial banking sector, interest rates have fallen even lower. At VietinBank, the interest rate ceiling for 6-month, 7-month, and 8-month terms is now only 4.8%, down 0.5 percentage points compared to before. However, most long-term terms remain unchanged, from 12 months to under 36 months, customers who deposit savings still enjoy interest rates of 6.8-6.9%/year.

BIDV also adjusted its deposit interest rate framework twice last month. The first time it reduced the interest rate for 1-2 month deposits by 0.2 percentage points, the second time it reduced the interest rate for 364-day and 13-month deposits by 0.1 percentage points. Currently, the interest rate for 1-2 month deposits at this bank is only 4.1%; the interest rate for over 12 months is 6.8-6.9%.

Abundant liquidity, no more pressure to mobilize

In general, banks tend to reduce interest rates more for short terms under 12 months, with a common decrease of 0.2-0.4 percentage points. Although it decreased compared to February, compared to the end of 2017, current savings interest rates for common terms are slightly higher, about 0.1-0.3 percentage points. The difference in mobilization interest rates between joint-stock commercial banks and state-owned commercial banks is still quite large, ranging from 0.5 to 0.9% for short terms under 12 months.

The fact that banks have simultaneously lowered input interest rates is believed to be due to abundant system liquidity, slowing credit growth while mobilized resources are still growing well.

According to the report of the National Financial Supervisory Commission, by the end of March, the credit-to-deposit ratio (LDR) was at 88.2%, higher than at the end of 2017 (87.8%). System liquidity was stable partly due to the SBV increasing foreign currency purchases and slow disbursement of government bonds.

Capital mobilized from economic organizations and individuals by the end of the first quarter increased by 3% compared to the end of 2017, higher than the same period last year (2.6%). Meanwhile, credit has shown signs of slowing down, estimated to increase by about 3.5% by the end of March compared to the end of 2017 (the same period last year was 4.3%).

Thus, with abundant liquidity while lending activities have cooled down, commercial banks' reduction of deposit interest rates is to reduce input interest costs and ensure profitability.

Not only interest rates in market 1, interest rates in the interbank market have also decreased quite sharply. The average overnight interest rate has decreased by 0.47 percentage points compared to the end of 2017 to 0.83%; the 1-week interest rate is at 0.98%, the 1-month interest rate is at 1.73% (decreased by 0.9% and 1.2% respectively compared to the end of 2017).