Bank deposits still increase strongly despite sharp interest rate drop

According to the financial reports of the third quarter of 2023 published by listed banks, the deposit balance of most banks has grown positively after 9 months. In particular, the current deposit champion is the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) with an absolute balance of up to 1.58 million billion VND, an increase of 7.5% compared to the beginning of the year; term deposits account for about 84% of this amount.

The next positions belong to two other large banks, including the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and the Joint Stock Commercial Bank for Industry and Trade of Vietnam (VietinBank), with deposit balances of VND1.35 quadrillion and VND1.31 quadrillion, respectively. Growth at the two banks compared to the beginning of the year was 8% and 5%, respectively.

However, these are not the banks with the highest deposit growth rate in the first 9 months of 2023. Financial reports show that the strongest deposit growth rate belongs to Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank) and Vietnam Prosperity Joint Stock Commercial Bank (VPBank).

In the first 9 months, HDBank's deposit balance increased by 58.3% compared to the beginning of the year, the highest increase in the industry, reaching more than 341,000 billion VND. In the third quarter alone, deposit growth at HDBank also reached 10.4%.

At VPBank, the deposit growth rate was recorded at 39% compared to the beginning of the year, reaching more than 421,000 billion VND. The driving force for the growth in mobilized capital mainly came from the parent bank's individual customers with an increase of up to 60% compared to the beginning of the year.

In addition to VPBank and HDBank, many banks also achieved strong deposit growth after 9 months such as: Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank) with 24.9%; Southeast Asia Commercial Joint Stock Bank (SeABank) with 22%, Nam A Commercial Joint Stock Bank (NamABank) with 21%... On the contrary, only Tien Phong Commercial Joint Stock Bank (TPBank) slightly reduced customer deposits by 0.6% compared to the beginning of the year.

The above list does not include the Vietnam Bank for Agriculture and Rural Development (Agribank). This bank has not yet announced its financial report for the third quarter of 2023. However, in the previous semi-annual financial report, Agribank's deposit balance led the system with more than VND 1.69 million billion at the end of the first 6 months of 2023.

The latest update from the State Bank shows that by the end of August 2023, total customer deposits at the credit institution system reached more than 12.4 million billion VND, an increase of more than 5.3% compared to the beginning of the year. Of which, the balance of deposits from residents accounted for more than 6.4 million billion VND, an increase of 11.8% compared to the beginning of the year.

The above figures partly reflect people's risk appetite. In the context of a sluggish real estate market and unpredictable fluctuations in other investment channels, bank deposits are still the channel that attracts customers even though deposit interest rates have continuously decreased since the end of the first quarter.

Statistics as of the morning of November 8, 12-month bank deposit interest rates were commonly at 5.1-5.5%/year, a sharp decrease compared to the peak at the beginning of the year, from 9-10%/year.

VPBank has just updated the interest rate reduction for terms under 6 months from 0.15-0.2%/year. The interest rate for online terms of 1-2 months has been reduced to 3.7%/year; and for terms of 3-5 months, it has been reduced to 3.8%/year.

Similarly at VietBank and NamABank, short-term interest rates decreased simultaneously.

Instead of the general rate of 4.4%/year, VietBank has lowered the interest rate for 1-3 month terms to 3.9-4.1%/year; for 4 and 5 month terms to 4.2-4.3%/year. NamABank has also lowered the interest rate for 1-3 month terms from the general rate of 4.65%/year to 3.6-4.2%/year...

Not only short-term terms, many banks such as National Citizen Commercial Joint Stock Bank (NCB), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Bao Viet Commercial Joint Stock Bank (BaoVietBank)... also reduced interest rates for many deposit terms over 6 months.

Interest rates for 12-13 month terms at NCB are currently 5.8%/year, and for 15-60 month terms are 6%/year, down 0.1%/year compared to before. Interest rates for 6-8 month terms at this bank are down to 5.5%/year; for 9-11 month terms are down to 5.65%/year, down 0.2%/year compared to the previous interest rate schedule.

With a similar reduction, Techcombank has lowered deposit interest rates for terms from 12-36 months to 5.25%/year; terms from 9-11 months to 4.8%/year; terms from 6-8 months to 4.75%/year. These interest rates have decreased by 0.1-0.2%/year compared to before.

Meanwhile, BaoVietBank has a stronger reduction for terms from 6 to under 12 months. Interest rates for the above terms are now down to 5.5-5.6%/year, down 0.3%/year compared to early November. Interest rates for terms from 12 months and above are down 0.2%/year compared to before, bringing the highest interest rate at BaoVietBank down to 6.2%/year.

The trend of decreasing deposit interest rates is likely to continue in the coming time. Although the decrease is forecast to slow down, experts believe that there will be a shift in cash flow from bank savings to other profitable investment channels.

According to Mr. Tran Xuan Bach, Market Analyst and Strategist, Bao Viet Securities Company (BVSC), the real estate market is gradually warming up thanks to support policies, and market liquidity is forecast to improve from the first half of 2024 onwards. In addition, the stock market is also an attractive investment channel for capital flows with a relatively positive return rate of nearly 14% since the beginning of the year.

"In the context of low interest rates, the shift in investment cash flow is inevitable. However, the shift depends on the understanding and risk appetite of investors," Mr. Bach emphasized.