Viet A Bank’s US$ deposit interest rate has been reduced to 5.55% per annum for 12-month term deposits. The rate represents a decrease of 0.2% over the bank’s rate in the fourth quarter of 2007, when the FED cut the interest rate for the third time that year.

ABBank and Nam A Bank have also announced new interest rates for US$ deposits: 5.5% per annum for 12-month term deposits (instead of 5.7% as seen in the fourth quarter of 2007). Meanwhile, ACB has lowered its interest rate to 4.05% for 12-month term deposits; Vietcombank to 4.6%.

General Director of a joint stock bank said banks have no reason to maintain high interest rates for US$ deposits while the US FED continuously lowers its rates.

The director said the rates offered by domestic banks are still higher if compared to the FED’s rate (over 5% vs. 3.5%). Therefore, he said domestic banks may cut interest rates further to close the gap between them and the 3.5% per annum threshold.

Currently, the US$ interest rates offered by Vietnamese commercial banks are relatively low when compared to VND interest rates.

Some banks are now offering interest rates of 8.9-10.23% per annum to mobilize 12-month term VND capital, while they only offer 4.6-5% to mobilize US$ capital.

It is clear that VND rates will bring higher profit. Moreover, as the VND continues to revaluate against the dollar, as many expect it will, people will find it more profitable to keep their VND.

Some exerts are warning though, that in the long-term, if less foreign investment capital flows in and Vietnam has difficulties paying debts, the VND will grow weak and it would therefore be more profitable to keep dollars instead.

Most recently, the State Bank of Vietnam said it will take necessary measures to prevent sharp devaluation or appreciation of the VND against the dollar.

Analysts have warned that commercial banks have a difficult year ahead, as the State bank, trying to curb inflation, tightens credit; which may make it difficult for banks to find capital outlets.

As commercial banks are partially disabled in terms of their lending for securities investments, they have shifted their lending target to real estate investors. However, sources say the central bank will soon limit those as well.

Source: DTCK.