Vietnam's Commercial Banks Raise Deposit Interest Rates Amid Competition and Rising US Federal Reserve Rate

As the US Federal Reserve increased its key interest rate to 4% on November 1, commercial banks in Vietnam have continued to hike their deposit interest rates to stay competitive. The Bank for Private Enterprises raised its interest rate by 0.12 percentage points for Vietnamese dong deposits and 0.3 for US dollar deposits, while the Military Bank increased its US dollar deposits by 0.2 percentage points, the sixth increase this year. Market analysts expect the deposit interest rate to continue climbing in the coming months, but at a steady pace, as the State Bank of Vietnam aims to curb inflation.

Key Takeaways:

• The joint stock Bank for Private Enterprises (VP Bank) raised its interest rate for Vietnamese dong deposits by 0.12 percentage points and for US dollar deposits by 0.3 percentage points.
• The Military Bank increased its US dollar deposits by 0.2 percentage points, the sixth increase so far this year.
• Several commercial banks had anticipated the FED's increase and hiked rates by 0.06-0.4 percentage points in advance.
• State Bank of Vietnam analysts forecast that the deposit interest rate would continue to climb in the coming months at a steady pace.
• The exchange rate between dong and the dollar is increasing, but only slowly, with analysts forecasting that dong devaluation would not be higher than one percentage point for the entire year.
• Despite the rising US Federal Reserve rate, lending interest rates in US dollars would still be 3 to 5% lower than lending interest rates in dong.

Statistics:

• 4%: The new US Federal Reserve interest rate, increased on November 1.
• 4.4%: The 12-month interest rate for US dollar deposits at the Bank for Private Enterprises (VP Bank), among the highest in the industry.
• 100%: The rate hike in dong deposits by Vietcombank, Vietnam's largest commercial bank, in October.
• 0.12 percentage points: The increase in interest rate for Vietnamese dong deposits by the joint stock Bank for Private Enterprises (VP Bank).
• 0.3 percentage points: The increase in interest rate for US dollar deposits by the joint stock Bank for Private Enterprises (VP Bank).
• 0.2 percentage points: The increase in US dollar deposits by the Military Bank.
• 4 to 5%: The expected higher profits that dong deposits could bring for depositors compared to US dollar deposits.

Sources:

• Asia Pulse, "Vietnam's commercial banks raise deposit interest rates amid competition, Nov 10
• VNA, "Vietcombank hikes dong, dollar deposit interest rates, Oct 27