Interbank market confidence index drops in September

Interbank market confidence index drops in September

Though the index remained just slightly above the neutral threshold of 50, banks were still relatively optimistic about economic growth and the management of the State Bank of Vietnam (SBV).

Under the Vietnam Interbank Market Research Association survey, banks ranked the outlook for domestic economic growth as the most positive. VNA/VNS Photo

The market confidence index for September released by the Vietnam Interbank Market Research Association (VIRA) stood at 50.55, representing a significant decrease of 7.23 compared to the previous month, according to the latest VIRA survey.

Survey results showed that although the index remained just slightly above the neutral threshold of 50, banks were still relatively optimistic about economic growth and the management of the State Bank of Vietnam (SBV).

Specifically, they ranked the outlook for domestic economic growth as the most positive. Expectations regarding the SBV's management were also relatively positive, ranking second.

However, according to the survey, banks were noticeably more cautious about the asset market, including real estate and stocks, and about the impact from the international financial market. Among the 10 survey categories, real estate had the lowest rating, while stocks witnessed the strongest decline in expectations compared to the previous month.

Banks also appeared cautious about the impact of the international financial market on the domestic market.

Survey results showed that concerns lie not only in global growth, but also in how external fluctuations are transmitted to Việt Nam through interest rates, exchange rates and capital flows. This is even more notable in September, when a lot of major central banks, including the Fed, hold policy meetings. 

At the same time, US-Iran tensions and oil price developments are increasing uncertainty about inflation, which may affect global interest rate expectations. For Việt Nam, these changes can directly impact VNĐ/USD interest rates, the exchange rate and room to regulate liquidity.

In the interbank market, short-term liquidity pressure has improved significantly. By September 8, the overnight rate fell to 2.5 per cent per year, even though the SBV conducted a slight net withdrawal during the session. 

However, the easing of liquidity pressure does not imply a corresponding loosening of financial conditions, as stable short-term liquidity was supported by the SBV's continued provision of significant funding to the banking system.

Funding pressure in the banking system has shown signs of easing, but has not yet been fully resolved. As of August 22, the growth rate of deposits slightly outpaced that of credit, signalling a marginal improvement in local currency funding. However, across the banking system, year-to-date deposit growth stood at 7.97 per cent, still trailing the 9.71 per cent credit growth.

Trends in deposit interest rates also reflect banks' ongoing need to bolster their stable funding bases. By the end of August, the average interest rate for 12-month deposits was approximately 8.4 per cent per year, an increase of 2.59 percentage points since the beginning of the year. 

Competition for deposits persisted into early September as several banks ramped up the issuance of certificates of deposit, offering products with tenors of less than six months yet yielding interest rates of up to 7-8 per cent per year. 

Bizhub