Modern Banking Trends in Vietnam: Dwindling Deposits and Shifts in Investment Preferences
Sliding Bank Deposits and Interest Rates
Decreased interest rates lead to withdrawals from savings accounts and a shift towards alternative investment opportunities
A series of adjustments have been made to bank deposit interest rates following the State Bank of Vietnam’s (SBV) directive to curb increasing rates. Over the span of February 25 to April 14, no fewer than 27 banks nudged their deposit interest rates downward by 0.1-1.05 percentage points per year [1]. Although there's been a recent spike, with banks such as Eximbank, VPBank, Nam A Bank, OCB, GPBank, and Agribank experiencing a surge in short-term interest rates, they remain capped at the SBV's "ceiling" level of 4.75% per year [5]. A selected few banks, including GPBank, Vikki Bank, and HDBank, continue to hold steady with deposits interest rates above 6% per year [1].
Elite investors have the advantage of even higher rates, with some banks like ABBank offering a staggering 9.65% per year under specific conditions [5].
Capital Drought
The decline in deposit interest rates has made savings less appealing, causing a steady withdrawal of funds from banks in search of alternative investments. This shift in behavior resulted in a 3.04% decrease in deposits from economic organisations compared to the end of the previous year [1].
Gold purchases have seen a surge, with higher returns on investment compared to the current savings rates [1]. This trend has also impacted lending, leading to a decline in capital availability for loans [1].
Creative Strategies from Banks
In light of reduced net interest margins (NIM), banks are prioritizing non-interest income sources and cutting costs [2]. Furthermore, various banks have launched low-interest credit packages to stimulate lending while adhering to the lower deposit interest rates [2].
Transactions at HDBank. Deposits from economic organisations have decreased by 3.04 per cent compared to the end of last year. - Photo cafef.vn
Banks in the Spotlight
In terms of market structure for corporate bonds, the banking sector continues to lead, with an impressive 44% share of the outstanding value of all corporate bonds [5]. The State Bank of Vietnam's Deputy Governor, Đào Minh, has stated that as growth in capital has been slower than credit growth, they will employ tools to support bank liquidity and facilitate credit for the government's economic growth target of 8% [3].
- The government's directive to decrease bank deposit interest rates has led some individuals to explore alternative investments, such as stocks or AI-driven personal-finance platforms.
- In an effort to offset the decreased net interest margins, banks are focusing on increasing their non-interest income sources and cutting costs, including offering low-interest credit packages to stimulate lending.
- The decline in deposit interest rates has caused a decrease in personal savings, with some opting to invest in stocks, AI, or even gold, as their returns are currently more attractive.
- Given the decreased deposits from economic organizations, the trend of capital drought in the banking sector is expected to continue, potentially leading to decreased lending capabilities and a strain on the economy.
- The banking sector in Vietnam remains significant in the market structure for corporate bonds, holding an impressive 44% share of the outstanding value of all corporate bonds. However, the state bank has revealed that they will implement tools to support bank liquidity and facilitate credit for the government's economic growth target of 8%.
- The slow growth in capital compared to credit growth has raised concerns, with the State Bank of Vietnam's Deputy Governor, Đào Minh, hinting at the potential use of AI and other technological advancements to optimize finance and banking operations in modernizing Vietnam's economy.
