Despite low interest rates, individual customers in Vietnam have continued to deposit their savings in banks, setting a new record high. According to the latest data from the State Bank of Vietnam (SBV), deposits of individual customers increased by more than VNĐ39.7 trillion in April, reaching over VNĐ6.7 quadrillion. This trend has been consistent throughout the year, with total deposits rising by more than VNĐ183 trillion, or 2.8%, since the beginning of 2024. The increase in savings is attributed to various factors, including rising interest rates and economic stability.
One of the primary factors contributing to the rise in individual savings is the increase in deposit interest rates. Over recent months, banks have continuously adjusted their rates to attract more depositors. In June, 24 domestic commercial banks increased their deposit interest rates by about 0.1-0.5 percentage points. Some banks, such as Eximbank, NCB, SeABank, BaoVietBank, and Saigonbank, raised rates for deposits under six months to 4.7% per year, close to the SBV’s cap of 4.75% per year.
The move to increase deposit interest rates comes in the context of a sharp rise in credit demand. By June, credit had increased by 4.45% from 2.4% at the end of May. This surge in credit demand has motivated banks to raise savings interest rates to attract more deposits and meet their capital needs. Analysts from MB Securities Company (MBS) predict that deposit interest rates will continue to rise slightly by 50 basis points in the second half of 2024, as production and investment activities accelerate.
Another factor driving the increase in savings is the overall economic stability in Vietnam. Despite global economic uncertainties, Vietnam’s economy has shown resilience, encouraging individuals to save more. The SBV’s data also shows that total means of payment by the end of April 2024 reached more than VNĐ16 quadrillion, up 0.13% from the beginning of the year. This indicates a stable financial environment that supports savings growth.
Impact on the Banking Sector
The record high in individual savings has significant implications for the banking sector. Increased deposits provide banks with more capital to support lending and investment activities. This, in turn, can stimulate economic growth by providing businesses with the necessary funds to expand and innovate. The rise in savings also enhances the liquidity position of banks, enabling them to manage their operations more efficiently.
However, the increase in savings also presents challenges for banks. As deposit interest rates rise, banks face higher costs for attracting and retaining deposits. This can impact their profitability, especially if lending rates do not increase proportionately. To mitigate this, banks need to focus on improving their operational efficiency and exploring new revenue streams. Diversifying their product offerings and leveraging digital banking solutions can help banks maintain profitability while managing the costs associated with higher deposit rates.
The rise in individual savings also underscores the importance of effective risk management. Banks must ensure that they have robust risk management frameworks in place to handle the increased volume of deposits and the associated risks. This includes maintaining adequate capital buffers, monitoring credit quality, and implementing sound governance practices. By doing so, banks can safeguard their financial stability and continue to support economic growth.
Future Outlook
Looking ahead, the trend of increasing individual savings is expected to continue. As economic conditions remain stable and interest rates rise, more individuals are likely to deposit their savings in banks. This will provide banks with a steady source of capital to support their lending and investment activities. However, banks must remain vigilant and adapt to the evolving financial landscape to sustain this growth.
The SBV and commercial banks are expected to continue their efforts to attract deposits by offering competitive interest rates and enhancing their service offerings. This includes leveraging technology to provide convenient and secure banking services, as well as developing innovative products that meet the needs of different customer segments. By doing so, banks can build stronger relationships with their customers and foster long-term loyalty.
In conclusion, the record high in individual savings at banks reflects the resilience and stability of Vietnam’s financial system. While this trend presents opportunities for growth, it also requires banks to navigate challenges related to rising costs and risk management. By adopting a proactive and customer-centric approach, banks can capitalize on this trend and contribute to the overall economic development of the country.
