Interest rate level "breaks" 6% mark, "peak" still maintained at 11%

The "peak" remains at 11%/year

In the last days of August and the beginning of September, the commercial banking system continuously made interest rate adjustments. As a result, the interest rate level successively “broke” the 7%/year mark, then to 6%/year.

Currently, the interest rates for 6-month, 12-month and 13-month terms have dropped below 6%/year. There are very few banks that list interest rates above or below 7%/year, such as DongA Bank (7.1%/year, 13-month term), National Citizen Commercial Joint Stock Bank (NCB) (6.9%/year, 12-month and 13-month term), etc.

Among them, DongA Bank attracts attention because it creates opportunities to give customers interest rates up to 8%/year.

Although the interest rate level continuously sets new "bottoms", currently, the peak is still maintained at 11%/year. Illustrative photo

Specifically, according to the posted schedule, the highest interest rate at DongA Bank is 7.1%/year, but this bank applies a margin policy of adding interest. Accordingly, for deposits of 1 billion VND or more, customers will receive an additional 0.9%. Thus, the maximum rate at DongA Bank is up to 8%/year.

But DongA Bank is not the bank with the highest interest rate. Currently, the highest rate of 11%/year belongs to Vietnam Joint Stock Commercial Bank for Industry and Trade (PVComBank).

For many months now, PVComBank has been applying an interest rate policy of up to 11%/year for 12-month and 13-month terms. However, this incentive is only for the super-rich because PVComBank stipulates that only deposits worth VND2,000 billion or more are eligible.

In addition, Ho Chi Minh City Development Joint Stock Commercial Bank ( HDBank ) also continues to maintain the highest interest rate of up to 9.1%/year. And like PVComBank, HDBank stipulates that this program is only for loans of 300 billion VND or more.

There is still room to reduce operating interest rates.

Although interest rates have continuously decreased, according to Yuanta Securities Company, there is still room for interest rate reduction.

Yuanta believes that the State Bank has cut interest rates four times by the end of August 2023, and Yuanta believes that the State Bank still has room to continue reducing operating interest rates, but it is still necessary to consider the next move of the US Federal Reserve (Fed) to make an appropriate decision.

According to Yuanta, attention should be paid to the exchange rate as the Fed has not shown any signs of cutting interest rates, while the State Bank's continued monetary easing policies will put pressure on the dong to depreciate.

Yuanta forecasts interest rates one year from now to be 6.029%, with a standard deviation of 0.0006%. The 95% confidence lower bound is 6.028% and the 95% confidence upper bound is 6.031%.

“We believe this result is reasonable and consistent with our forecast that the State Bank may continue to reduce the operating interest rate by another 50 basis points by the end of the year,” Yuanta said, adding that interest rates may continue to fall.

Currently, the current 12-month deposit interest rate at four state-owned banks is 6.3%. Therefore, if the State Bank issues a further 50 basis point reduction in the operating interest rate, Yuanta forecasts that the four state-owned banks will adjust their 12-month deposit interest rate to 6.0%/year or lower.

Yuanta also observed that deposit growth increased by 6.4% in Q4/2022, after the State Bank raised interest rates in October 2022, and the majority of deposits in this period were term deposits of 6 to 12 months.

Therefore, with deposits worth about VND496 trillion, maturing between June and December 2023, it is likely to lead to more capital flows into stocks in the first half of 2023.

However, Yuanta Securities does not believe that all maturing deposits will be diverted to the stock market. Assuming that 10% of those deposits will flow into the stock market, the actual figure will be about 49 trillion VND, equivalent to the trading value on the stock market in about two days.

Source: https://www.congluan.vn/mat-bang-lai-suat-thung-moc-6-dinh-van-duy-tri-muc-11-post264018.html