Deposit rates may rise gradually

At SCB, deposit rates for 12-month terms or more are being paid from 7% to 7.35%/year. 

As of January 20, 2022, the 3-month term deposit rates and the 12-month term deposit rates of state-owned banks remained unchanged compared to the level at the end of 2021, while the 3-month term deposit rates and the 12-month term deposit rates of private banks edged up 8bps and 3bps, respectively, compared to the level at the end of 2021.

At Saigon Commercial Joint Stock Bank (SCB), deposit rates for 12-month terms or more are being paid from 7% to 7.35%/year. This is also the highest deposit rate recorded in the market. Meanwhile, the deposit rates at Techcombank also recorded an increase of about 0.4-0.5%/year in some terms.

The deposit rate is unlikely to remain at a historic low in 2022 for the following reasons: (1) higher demand for fund raising as credit growth accelerates; (2) inflation pressure in Vietnam could pick up in 2022; and (3) competing more fiercely with other investment channels such as real estate and securities to attract capital inflow. "We expect that deposit rates will slightly increase by 30-50 basis points in 2022. We see the 12- month deposit rates of commercial banks climbing to 5.9–6.1%/year at the end of 2022, which is still lower compared to the pre-pandemic level of 7.0%/year," VNDirect said.

In the past week, the banking system’s liquidity has begun to ease, due to a decrease in demand for short-term loans in the open market. Specifically, the amount of OMO injected dropped sharply to VND 522 billion, from VND 14,390 billion in the week prior and nearly VND 9,000 billion in the week before the Tet holiday. Less stressful liquidity helped interbank rates cool down in the past week. In the near future, BVSC believes that the banking system’s liquidity will be more abundant, when the seasonal demand for payment during the Lunar New Year has passed. Meanwhile, when the amount of realized FDI and export value increase, the State Bank of Vietnam (SBV) may continue to buy foreign currencies and inject VND into the market. Even so, the three short-term interbank rates are higher than in the previous two years. BVSC believes that in the future, it is unlikely that interbank rates will drop to the low base of 2020 or lower than in 2021. They will, however, not rise as sharply as in recent weeks.

Many financial experts said a rise in deposit rates would not push up lending rates. Because the SBV is implementing an interest rate compensation package with a scale of VND3,000bn. It offers lending interest rates of only 3–4% per year for businesses strongly affected by the COVID-19 pandemic. Moreover, the government plans to increase the scale of the package of interest rate compensation for businesses to VND40,000bn, focusing on a number of priority audiences, including (1) small and medium-sized enterprises, (2) businesses participating in a number of key national projects, and (3) businesses in certain industries (tourism, aviation, transportation). "Thanks to these supportive policies, we expect lending rates to decrease by 20–40 bps in 2022F, on average", VNDirect said.