What prospects for deposit rates by year-end?

The overnight interbank rate hit a 13-month low, indicating a liquidity surplus in the system. Amid rising exchange rate pressures, the State Bank of Vietnam (SBV) resumed net liquidity withdrawal in April, with an estimated value of approximately VND 22.2 trillion. Specifically, the SBV injected approximately VND 220.3 trillion through open market operations (OMO) at a 4% interest rate for tenors ranging from 7 to 91 days. Concurrently, the total matured capital in the month exceeded VND 242.4 trillion.

Despite SBV’s net absorption efforts, the interbank overnight interest rate, which remained around 4%–4.4% in the first half of April, dropped sharply to a 13-month low of 2.2% on April 25, reflecting excess liquidity in the system. This significantly impacted the VND-USD interest rate gap and exchange rate pressures. While the USD overnight rate exceeded the VND rate by 0.2%–1.2% from the start of the year to mid-April, this gap widened sharply to 2.1% by late April - the highest level this year. By month-end, the overnight rate stood at 3.8%.

While rates for tenors ranging from one week to one month hovered around 3.9% - 4.1%. Deposit rates continued to decline in April, albeit at a slower pace. Following widespread interest rate cuts by numerous banks over the past two months, deposit rates continued to decline in April, albeit at a slower pace. During the month, there were 9 commercial banks that reduced deposit rates by 0.1% to 0.5% per year across various tenors during the month.

Conversely, a few small and medium-sized private banks raised input interest rates amid signs of a robust credit demand recovery. According to the SBV, by the end of Q1/2025, credit growth had increased by 3.9% compared to the end of 2024 - nearly three times higher than the same period last year. Nevertheless, the majority of banks continued to lower deposit rates, maintaining the dominant trend. By the end of April, the average 12-month deposit rate at commercial banks had decreased by 12bps from the beginning of 2025, reaching 4.93%, while the rate for State - owned banks held steady at 4.7%.

MBS expects deposit rates to stay at 5.5%–6% by the end of 2025. Although deposit rates have been on a downward trend following the PM’s directive, it believes that input rates will gradually increase toward the end of 2025, driven by expectations of positive economic growth and credit growth. As of March 31st, credit growth had increased by 3.9% compared to the end of 2024, indicating a strong recovery in capital demand.

“We expect credit growth will reach 17 – 18% in 2025, driven by the recovery of the manufacturing sector and domestic consumption amid rising demand, as well as the acceleration of public investment disbursement. Therefore, we anticipate that the average 12-month deposit rates of large commercial banks will fluctuate within the range of 5.5% – 6% by the end of 2025”, said MBS.