SBV Orders 50bp Deposit Rate Cut as BIDV, Vietcombank Slash Lending Rates

Overview

State Bank of Vietnam (SBV) Governor Phạm Đức Ấn directed credit institutions to cut deposit rates by at least 0.5 percentage points on tenors of six months and above, and to channel lending-rate relief toward production and business borrowers, at a meeting with lenders on 19 October. BIDV (ticker BID, HOSE) moved first among the large state-owned banks, announcing a preferential credit package with rates from 6% per year, up to 2 percentage points below its standard pricing. The directive matters for BID, VCB, LPB and STB because it compresses both funding costs and lending margins across the banking sector.

Key Facts

• SBV required banks to cut deposit rates by at least 0.5 percentage points (50bp) for tenors from 6 months, per the 18 October directive.
• Governor Phạm Đức Ấn chaired a follow-up meeting with credit institutions on 19 October.
• Average lending rates rose 0.2 percentage points month-on-month in August to 10.7% per year, roughly 3 percentage points higher than a year earlier.
• Peak listed deposit rates had climbed to 7.6-7.8% per year, with preferential deposit rates at many banks running 8.5-9.5%.
• BIDV announced a package with rates from 6% per year, up to 2 percentage points below normal, for short-term dong loans in priority sectors.
• Vietcombank Chairman Nguyễn Thanh Tùng committed to cutting lending rates by at least 2 percentage points through year-end.
• Sacombank announced a VND 40,000 billion preferential credit package with a 2 percentage point rate reduction for domestic, import-export and FDI enterprises.

What Happened

Speaking at the 19 October meeting, Governor Phạm Đức Ấn said rate cuts should not be applied uniformly but should target the right borrowers, with priority for production and business and other priority sectors. He asked banks to consider applying relief to existing outstanding loans as well as new disbursements, so that operating enterprises see their financial burden ease immediately rather than only on fresh borrowing. To make the cuts real, he called on institutions to trim operating costs, share profit and lower their cost of funds. The SBV said it will monitor deposit and lending rates and banks’ published rate tables, and will step up inspections with strict handling of violations in funding and credit activity.

The directive follows a sustained rise in the rate environment. SBV data show average lending rates rose 0.2 percentage points in August from July to 10.7% per year, about 3 percentage points above the level of a year earlier, while the highest listed deposit rates reached 7.6-7.8%. Within a day of the directive, BVBank, LPBank and Vietbank published new deposit tables cutting 0.5 percentage points on tenors of six months and longer, bringing listed rates below 7%. On the lending side, BIDV, Vietcombank, Agribank and Sacombank announced preferential packages, with Vietcombank and Agribank each citing reductions of up to 2 percentage points.

Market Context

BID closed at VND 33,950 on 18 October on HOSE, ahead of the 19 October announcements; LPBank (LPB, HOSE) closed at VND 38 on 19 October, up 0.39% on volume of 1,212,900 shares, while Vietcombank (VCB, HOSE) closed at VND 56,900 and Sacombank (STB, HOSE) at VND 62,800 on 18 October. The directive lands after a period in which deposit competition pushed funding costs higher across the system, pressuring net interest margins for banks that fund themselves heavily through retail deposits. Vietnamese bank shares have traded on the tension between policy-directed rate relief and the earnings impact of thinner spreads.

Strategic Significance

The policy is a directed-margin story rather than a volume story. By forcing deposit rates down at the same time as lending rates, the SBV is trying to protect bank profitability while lowering borrower costs, but the sequencing matters: BIDV’s 6% floor and Vietcombank’s 200bp commitment apply mainly to short-term loans in priority sectors, so the drag on asset yields is concentrated in segments where state-owned banks already hold large shares. For BID specifically, the package reinforces its role as a policy transmission channel, which supports its deposit franchise and credit growth allocation but caps near-term net interest margin expansion. The explicit instruction to consider existing outstanding loans is the more consequential detail, because repricing the back book would compress margins faster than new-loan pricing alone.

What to Watch

• September and October SBV money-market and rate statistics, to confirm the 50bp deposit cut is implemented system-wide.
• Third-quarter earnings releases from BID, VCB, LPB and STB, particularly net interest margin guidance and deposit-cost commentary.
• Take-up data on BIDV’s 6% package and Sacombank’s VND 40,000 billion facility, which would indicate whether credit demand responds.
• SBV inspection findings on deposit-rate competition and any penalties for non-compliance.
• Any extension of relief to existing outstanding loans, which would change the margin math for the sector.