Banks raise deposit rates but keep loan rates unchanged

According to the General Statistics Office, the banking system reported credit growth of 1.9% as of March 20, lower than 2.23% in the same period last year.

Banks issue certificates of deposit

Most banks have continued revising up deposit rates, especially for long tenors, to improve their liquidity.

HDBank has launched a promotional program in which higher interest rates are offered to customers depending on their age. Its highest deposit rate is 7.8% per year.

Meanwhile, other banks are offering high interest rates for long-term certificates of deposit (CD). Saigon-Hanoi Bank has issued VND10 trillion worth of deposit certificates for individual and corporate clients, with rates of up to 8.9% per year. According to a bank official, the CD issue will help it mobilize more medium- to long-term capital.

Maritime Bank has also introduced a kind of CD with interest rates up to 30% higher than normal deposit rates. Currently, the lender applies deposit rates of 6.8%, 7.3% and 7.7% per year for terms of six, 12 and 18 months, respectively.

Since early this year, BIDV, LienVietPostBank and SeABank have also offered certificates of deposit with attractive interest rates. With these products, banks will be able to have more medium and long-term capital to meet the requirements of the State Bank of Vietnam and can calculate capital costs easily to fix rates for corporate borrowers, according to financial experts.

Nguyen Dinh Thang, chairman of LienVietPostBank, said that depositors often choose short tenors, while enterprises always have strong demand for medium and long-term capital. Therefore, issuing certificates of deposit helps banks mobilize stable medium and long-term capital, thus lowering rates for corporate loans.

Le Dat Chi, a lecturer at the University of Economics HCMC, said that those enterprises taking out medium or long-term loans are subject to floating rates, which are revised every three to six months. If banks mobilize 12-36 month capital by issuing CDs, they could fix rates for enterprises for longer term, thus helping companies devise a longer-term business plan.

Lending rates stay unchanged

Although many lenders have issued CDs, the deposit growth rate in the banking system was just 1.72% in the first quarter of 2019, lower than last year’s 2.2%, the General Statistics Office pointed out.

Despite higher rates for depositors, many bankers predicted, lending rates would remain unchanged due to the competition in the banking market. Besides this, banks are required to stabilize lending rates to support businesses.

According to an official of an HCMC-based bank, higher capital costs may have a bearing on lending rates.

However, banks may not raise their rates as borrowers may switch to other banks with lower rates. Moreover, some banks have cut operational costs to make their lending rates stable.

Pham Manh Thang, deputy general director of Vietcombank, said the bank deployed plans to improve its credit quality in 2018. Therefore, given its low ratio of bad debt, Vietcombank could cut lending rates for corporate clients.