US-China trade tensions fuel exchange and deposit rate

The growing tension between the US and China has been heating up banks' deposit rates

Privately-held Ban Viet Bank is currently offering a ceiling deposit rate touching 8.6 per cent per annum, applicable to savings from 24 to 60-month terms.

Simultaneously, the bank has launched an online savings programme with 8.7 per cent annual interest for savings of the same terms.

Generally, the savings with terms over 36 months enjoy the highest interest rate at banks, except for Nam A Bank and ABBank which are also the lenders with the second- and third-highest interest rates, at 8.45 per cent and 8.3 per cent, after Ban Viet Bank. These rates are applied to savings with the term of only 13 months, but to enjoys such favorable rates, the savings must exceed VND500 billion ($21.7 million).

Eximbank’s ceiling rate is at 8 per cent per annum, while the ceiling rate of most other banks is pegged below 8 per cent.

For instance, it is capped at 7.8 per cent at VIB, 7.7 per cent at SCB, and 7.4-7.6 at MBBank and Maritime Bank. The remaining banks' ceiling deposit rates hover around 7 per cent.

For savings with six-month, nine-month, 12-month, and 13-month terms, Ho Chi Minh City commercial lender HDBank offers an added interest rate of maximum 0.6 per cent per annum, with the ceiling mobilising rate reaching 7.7 per cent per annum.

Besides, to attract idle capital, a number of credit institutions launched certificates of deposit (CDs) with attractive interest rates.

Accordingly, small-cap private lender VietABank has just announced issuing CDs with a record interest rate. Retail customers buying 24-month CDs worth at least VND10 million ($430) will enjoy an interest rate of 8.38 per cent per annum which will reach 9.1 per cent per annum if they receive the interest sum at the end of the term.

Beforehand, some lenders have issued CDs with the interest rate of approximately 9 per cent per annum.

The long-term seven-year CDs with face value of at least VND1 million ($43) each issued by Ho Chi Minh City-based Sacombank enjoy 8.6 per cent interest rate per annum.

Other CDs issued by BIDV, SHB, or MSB earmarked to individual and corporate customers to raise medium and long-term capital sources report high interest rates reaching 8.9 per cent per annum maximally.

Most significantly, fledging VietCredit Finance Company has just issued the third trench of CDs with a total value amounting to VND1 trillion ($43 million) with a 12-month term and an interest rate of 10 per cent per annum applicable to investments over VND100 million ($4,300).

In light of the State Bank of Vietnam’s recent regulations, from the beginning of this year, the ratio of short-term capital banks are allowed to feed long and medium-term loans was reduced from 45 to 40 per cent.

Competing with other banks for deposits from 12-month terms upwards could help banks and financial firms replenish capital sources to serve firms’ long- and medium-term capital demand.

Besides, senior economist Le Xuan Nghia said that the escalating US-China trade tensions and China’s devaluation of the yuan had a detrimental impact on the Vietnamese dong–US dollar exchange rate and is putting pressure on banks’ interest rates.

Nguyen Hoang Minh, deputy director of the central bank's Ho Chi Minh City branch, said that they had just sent documents asking city-based banks to keep the lending rate stable to serve firms, avoiding the lending rate to go up, similar to the interest rate trend.