Deposit interest rates forecast to hit bottom in Q1 2024

A bank teller counts money at a transaction office in Hà Nội. 12-month deposit interest rates of large commercial banks are forecast to move up by 25-50 basis points, returning to 5.25-5.5 per cent in 2024. Photo cafef.vn

Deposit interest rates are unlikely to decrease further and might hit bottom in the first quarter of 2024 as credit demand will increase this year, analysts forecast.

In a macro report released last week, analysts of the MB Securities Company (MBS) believe that in the context of more positive growth of export and investment and consumption against last year, capital demand will return to balance instead of surplus as currently. They forecast that credit growth in 2024 will reach about 13-14 per cent.

However, MBS analysts believe the pressure to increase interest rates is not great because the US monetary tightening cycle has almost ended. With the forecast that the US Federal Reserve (Fed) will lower interest rate to approximately 4 per cent by the end of 2024, the pressure on the foreign exchange rate is not great that will help the State Bank of Vietnam to have room to maintain the current monetary policy.

"We forecast that 12-month deposit interest rates of large commercial banks will be able to move up by 25-50 basis points, returning to 5.25-5.5 per cent in 2024," MBS analysts said.

Some private banks have recently started to inch up interest rates mainly for short terms of less than five months to 2.5-3.8 per cent per year to attract more depositors after the Lunar New Year. As for 12-month deposits, the rate has fluctuated around 5 per cent per year.

State-owned banks have not yet shown any move to adjust interest rates and their average interest rate is currently still 4.7 per cent for a 12-month term.

In the interbank market, interest rates peaked on February 22 this year due to seasonality that put pressure on short-term liquidity and pushed up overnight interest rates to 3.7 per cent. However, right after that, the rates have gradually cooled down and returned to a low level. Overnight interest rate is currently listed at 1.4 per cent, down more than two-thirds from their peak and interest rates at other short terms of one month or less are currently quoted in the range of 1.5-2 per cent.

The State Bank of Vietnam (SBV) continued to inject money through the open market operation (OMO) channel last month. On February 20 and 21, the SBV injected more than VNĐ6 trillion through the OMO channel with an interest rate of 4 per cent per year and a seven-day term. This money matured and returned to the SBV.

Meanwhile, the SBV’s bill issuance channel had no transaction, showing that liquidity in the banking system has returned to a stable state.