Vietnamese banks face significant pressure to maintain high interest rates on deposits and bonds, which is expected to prevent a substantial reduction in lending rates during the second half of the year. This situation arises from persistent liquidity challenges within the banking system and a growing disparity between credit growth and capital mobilization.

In the first week of July, some banks offered online deposit interest rates of 7-7,8% for 6-12 month terms. For longer terms, specifically 24-36 months, rates at some institutions exceeded 9%. Beyond publicly listed rates, the competition for negotiated interest rates also intensified, with many banks, particularly small and medium-sized ones, launching incentive programs that include minimum deposit requirements.

The bond market has also established a new baseline for average interest rates, reaching 8,7% for the initial interest period (12 months). No bank, whether state-owned or private, issued bonds with interest rates below 8%. For floating-rate bonds, the added margin was adjusted from 2-2,5% to 3,8%.

Interbank interest rates saw significant fluctuations, reflecting systemic liquidity pressure. According to MB Securities Company, the overnight rate surged to 17,25% in the first Quarter and 10,45% in the subsequent Quarter. This pressure stems from capital mobilization from market one (where financial institutions transact with businesses and individuals) not keeping pace with credit growth. Currently, banks primarily mobilize capital through retail deposits, bonds, interbank borrowing, and syndicated loans from foreign organizations.

Tran Van Tanh, Head of Institutional Client Analysis at Yuanta Vietnam Securities Company, stated that while banks can mobilize through retail deposits, bonds, and interbank borrowing to meet capital needs, interest rates fluctuate significantly, especially in the interbank market. Foreign syndicated loans offer stable medium to long-term capital but require extensive negotiation and meeting various criteria. Tanh added that many 2-3 year bank bonds are paying 8-9% interest annually, which necessitates savings deposit interest rates remaining high to attract depositors. He therefore forecasts that capital mobilization interest rates will be difficult to reduce in the final months of the year.

Concurring with this view, MB Securities Company's analysis team believes capital mobilization interest rates will remain high due to liquidity pressure in the second half of the year. As of mid-June, credit growth reached approximately 6,38%, while capital mobilization increased by only 4,3%, creating a difference of over two percentage points. Pham Chi Quang, Director General of the Monetary Policy Department (State Bank of Vietnam), highlighted this disparity at a press conference in early July, stating, "This puts significant pressure on the banking system's liquidity safety indicators."

A State Bank of Vietnam representative reported that the system-wide loan-to-deposit ratio (LDR) is hovering around 112-113%, which is a high level. This means for every 100 dong of mobilized capital, the system lends out approximately 112-113 dong, with the deficit needing to be compensated by other capital sources. The significant gap between capital mobilization and credit is the primary reason for rising deposit interest rates, most evident since late 11/2025. According to Cao Viet Hung, Director of Banking and Finance Sector Analysis at ACB Securities Company, market one mobilization interest rates have increased by two percentage points compared to the end of QIII/2025.

Hung forecasts that mobilization interest rates will remain relatively high and may only slightly decrease by 0,2-0,5% in the second half of this year if foreign direct and indirect investment capital flows positively. However, he emphasized that such a scenario heavily depends on developments in Middle East tensions and world oil prices.

Customers transact at a VIB bank counter. Photo: Giang Huy

With key mobilization channels facing pressure and rising input capital costs, reducing lending interest rates in the second half of the year becomes a challenging task for banks. However, the likelihood of further increases is also low due to the imperative to support economic growth. Monthly data from the State Bank of Vietnam indicates that average lending interest rates have gradually edged up within a relatively narrow margin, from 7-9,3% in January to 8-10,1% in May. For priority sectors, short-term lending interest rates remained stable around 3,8-3,9%, below the regulated maximum of 4%. "The State Bank of Vietnam aims to cool down lending interest rates to support the economy, but high capital mobilization costs leave commercial banks with little room to reduce rates," Tanh commented.

Currently, the difference between lending and mobilization interest rates for many banks hovers around 2,5-3 percentage points. Banks universally face the significant challenge of protecting their net interest margin (NIM). This industry-wide indicator is on a downward trend, but with strong differentiation based on each bank's size and characteristics. Large banks with an advantage in non-term deposits are expected to experience less erosion of their profit margins than the overall market. In contrast, smaller banks with high credit growth due to retail lending or real estate business will face greater pressure to reduce NIM.

Earlier this month, the State Bank of Vietnam instructed banks to implement a series of measures for safe credit growth, including reviewing and reducing costs to create room for lowering overall lending interest rates. Previously, the regulatory agency introduced a flexible mechanism to adjust the proportion of State Treasury deposits included in the LDR, instead of a fixed 20%. According to S&I Ratings analysis team, this could help reduce capital mobilization pressure and ease interest rate competition among banks in the coming period.

Phuong Dong