Banks announce further interest rate cuts

Thursday, Mar 12, 2015 08:00

A customer takes out a bank loan. Commercial banks are continuing to cut deposit interest rates due to high liquidity and low inflation. — VNA/VNS Photo Tran Viet

HA NOI (Biz Hub) — Resuming operations after Tet, many commercial banks are continuing to cut deposit interest rates, owing to good liquidity and low inflation.

Agribank cut annual rates last week for some terms by 0.2 to 0.4 percentage points.

Accordingly, the highest rate applied for deposits of more than 18 months in the bank is 6.3 per cent yearly, down 0.2 percentage points from the previous rate. Deposits with 4 to 6 month terms and six to 12 month terms have also been reduced by 0.3 and 0.4 percentage points to 5.3 and 5.4 per cent, respectively.

Eximbank also posted a new deposit rate of 6.1 per cent per year last week for 12-month term deposits, reflecting a significant drop of 0.28 percentage points. The bank's six to 11-month term deposit rates also fell 0.1 to 0.18 percentage points a year and the one-month term deposit rate slipped marginally by 0.08 percentage points a year.

Techcombank also cut deposit rates by 0.1 to 0.3 percentage points a year, while the Saigon Commercial Bank (SCB) trimmed its deposit rates by 0.1 to 0.2 percentage points a year. According to an SCB representative, the deposit rates are likely to fall further in the future.

Rates at BacA Bank, which often lists the highest rate in the banking system, also fell last week for its long-term deposits from 7.9 per cent to 7.65 per cent.

According to a report from the General Statistics Office, the consumer price index (CPI) in February dropped 0.05 per cent, compared with January and 0.25 per cent compared to last December. Declining inflation has provided very favourable conditions for interest rates cuts, while still maintaining rates sufficiently attractive to maintain deposits.

Currently, the deposit interest rate gap between large-sized and small-sized banks remains stable at roughly 1.5 per cent annually, depending on the deposit's terms. Small-sized banks often have to offer higher rates than large-sized banks' to lure depositors.

According to the latest survey on business trends at credit institutions and foreign banks' branches during the first quarter of this year, liquidity in the banking system has continuously improved. Roughly 89 per cent of surveyed credit institutions said their liquidity had improved from last year and is currently in a good condition. Strong liquidity will continue to be maintained this year as well.

Under the survey, the institutions also anticipate their deposits will rise by 4.5 per cent on average during the first quarter this year and surge by 14.35 per cent for the entire year.

Given the current context, it is expected there will be more lending rate cuts going forward.

Last week, HSBC had also expressed the view that the State Bank of Viet Nam's (SBV's) monetary moves in recent years, particularly its open market operations (OMO), will determine whether the interest rate is likely to be trimmed further in the coming months.

According to HSBC, the real interest rate has in fact increased during the recent months; and the bank therefore predicted that SBV is likely to cut the OMO by another 0.5 per cent to 4.5 per cent by the end of the year.

SBV also expects to cut annual rates for medium- and long-term loans by 1 to 1.5 percentage points this year. — VN

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