Hanoi (VNS/VNA) - Commercial joint stock bankscontinued to lower deposit interest rates early this month – a move that raiseshope of a fall in lending rates.

After the ‘rate war” in December when saving interest rates werepushed up to 11% per year at some banks, commercial banks started to adjustrates down after Tet (Lunar NewYear) and cut further last week.

From February 9, National Citizen Joint Stock Bank (NCB) loweredits saving interest rates by between 0.2-0.45 percentage points, depending onthe term. Both the six-month and 12-month term rates now stand at 9.3% peryear, down from 9.7% and 9.5% per year, respectively.

Early last week, Sai Gon Commercial Joint Stock Bank (SCB) – theleading player in the ‘rate war’ last year – reduced saving rates on many terms.Its 24-month rate now stands at 9.1% per year, down from 9.95%, and the12-month rate dropped to 9.5% from 9.95%.

Techcombank also cut saving rates by 0.5 percentage points forterms of six months or more from February 7, while PVComBank reduced rates by0.2-0.3 percentage point, bringing the six-month rate down to 8.3% per year and12-month rate to 8.8% per year.

Except the Big Four, including Agribank, Vietcombank,VietinBank and BIDV, which have kept their interest rates steady in the pastseveral months, deposit rates listed at most banks now fall to 9.5% at thehighest.

At the meeting between the State Bank of Vietnam (SBV),commercial banks and property developers on February 9,Vietcombank General Director Nguyen Thanh Tung said before this meeting,banks’ leaders agreed to cut the deposit rates to reduce the lending rate.

The ceiling deposit rate may be brought down to 8.7% per year inthe coming time instead of the current 9.5% per year, a bank leader said.

The Governor of the central bank has asked commercial banks tocontinue decreasing operating costs, streamlining administrative procedures andunnecessary expenses to have room to reduce lending interest rates. The SBVemphasised that it will monitor cases where banks continue to raise interestrates and take measures to deal with these banks.

Unexpected but understandable

The banks’ movements, though surprised the market, arecomprehensible given the context that many global central banks have officiallyslowed down their rate hike roadmap on belief that inflation has passed itspeak.

In the policy meeting in early February, US FederalReserve (Fed) only raised the keyrate by 0.25 percentage points after having made four consecutive hikes of 0.75percentage point in 2022 and one more 0.5 percentage point increase in the lastmonth of 2022.

Meanwhile in Vietnam, some comments have suggested the pressure tocontinue raising the interest rate of the State Bank (SBV) to support theexchange rate in 2023 has decreased significantly.

In a recent report, Bao Viet Securities Co (BVSC) said depositrates were almost flat in January, showing signs of cooling down from the feverin December and may continue to decrease in 2023 due to favourable macroconditions.

“BVSC believes that (SBV’s) pressure to raise interest rates tosupport the exchange rate will no longer continue in 2023. Instead, monetarypolicy this year is likely to shift to a supportive direction for growth,” itsaid in the report.

The securities company expects interest rates to fall again in2023, with clearer signs from the second quarter, when the Fed stoppedraising interest rates and Vietnam’s inflation cooled down.

According to Viet Dragon Securities Co, exchange rate pressure wasthe main cause for the hike of interest rates in 2022 but now this pressure hascooled down, which may lay a foundation for SBV to keep key interest ratesunchanged in 2023.

In addition, the inflation target in 2023 is loosened to 4.5 % andfiscal policy shares the pressure with monetary policy, so the exchange rate isexpected to decrease as well.

Challenges remain

However, pressure on interest rate is still large.

It can be seen that the lending rate now doubles or more of thedeposit rate, averaging between 13-17% per year, even higher.

Economist Le Xuan Nghia, a member of the National Financial andMonetary Policy Advisory Council, said the current interest rate ground is toohigh.

If the inflation rate is around 4%, the savings interest ratesshould be around 6-7% per year to help keep the lending rates atrational levels.

Vietcombank Securities Company (VCBS) predicts the depositinterest rate will remain high at least until the middle of the year. Amidstiff competition to mobilise capital, VCBS believes the group of small- andmedium-sized commercial banks will not reduce interest rates in major terms. Itis forecast that deposit rates will peak in the first six months of 2023with an increase of 1-1.5 percentage points.

Director of SBV’s Monetary Policy Department Pham Chi Quang saidin 2023, the global economy is likely to have a recession, and at the sametime Fed will continue its rate hike. These factors will put pressureon interest rates to continue./.