“HANOI: “Vietnam Banks Grapple with Rising Costs Amid Deposit Decline.”Vietnam’s banking sector grapples with heightened borrowing expenses following the country’s first monthly dip in banking deposits in over two years. Concurrently, escalating inflation adds to the challenges, spotlighting the need for strategic financial management amid evolving economic conditions.”
“Banks are adjusting their strategies by offering elevated interest rates on deposits in response to the decline, a move that may translate into higher borrowing costs. This dynamic poses a challenge to government endeavors aimed at stimulating credit growth, which is essential for steering economic recovery back on course.”
“Can Van Luc, serving as a government adviser and economist at the Bank for Investment and Development of Vietnam, underscored the proactive stance of banks in fortifying their deposit base. This preemptive measure is driven by the anticipation of increased loan demands forecasted for the coming months, reflecting a strategic
State media reported an average increase of up to 0.3 per centage points in interest rates on bank deposits in the first week of May. Mirae Asset, a broker, said more than 10 banks had recently raised interest rates on deposits.
Corporate deposits at banks as of end-January fell by about 2.4 per cent from the end of last year to 6,670 trillion dong ($262.29 billion), while deposits by individuals fell 0.5 per cent to 6,500 trillion dong, the latest central bank data shows.
This was the first monthly fall in more than two years, the State Bank of Vietnam (SBV) data shows. the SBV is targeting credit growth of 15 per cent for this year, but lending by banks by the end of March rose by only 1.34 per cent from December. Credit growth in Vietnam often accelerates in the second half of the year when demand picks up.
Depositors have seen several rounds of cuts in interest rates over the last year as banks faced higher risks and a surge in bad debt from prolonged real estate sector turmoil.
Vietnam Technology and Commercial Joint Stock Bank on Wednesday raised its rates on all deposit terms by 0.1-0.4 per centage points, a bank employee said. This raised its rates on short-term deposits to 4.55 per cent-4.95 per cent. Consumer prices in April rose 4.4 per cent from a year earlier, Vietnam’s General Statistics Office said, rising closer to the SBV’s 4.5 per cent inflation ceiling for the year.
