Deposit rates inch down to reluctant 11%

A customer scrutinizes deposit rates offered by Vietnam Asia Commercial Bank. Deposit rates are now at the same level of 11% for terms from one to 36 months - Photo: Thuy Trieu

HCMC – Almost all commercial banks have complied with a pledge made earlier to reduce their deposit rates, but signs of reluctance are seen in the new move when lenders quote the same rate of 11% for deposits of all terms.

Since late last week, banks have cut their rates for Vietnam dong deposits to a maximum of 11% per year for terms starting from one month instead of the previous level of 11.2% under their commitments with the Vietnam Banks Association.

Some big banks such as Asia Commercial Bank, Vietnam Export Import Commercial Bank and Vietcombank have revised their deposit rates for Vietnam dong with the highest rate standing at 11% per year.

On Monday, many other banks also followed suit.

The new common rate is believed to put smaller banks at a disadvantage in competition with larger institutions. Furthermore, operating costs will also be higher as banks may attract short-term funds only when offering the same interest rate.

That means banks will have to rely on promotions to lure depositors.

At Vietnam Asia Commercial Bank, those who deposit at least VND20 million for six, nine, or 12 months can enjoy a lot of incentives such as added rate for depositors older than 50 years, bonus cash depending on the deposit value, and vouchers to buy goods.

Therefore, depositors now do not need to compare interest rates offered by different banks but will look at available promotion programs.

However, lower borrowing rates will make it possible for banks to cut lending rates as well, a move sought by the Government and the central bank.

Dam The Thai, deputy general director of HDBank, said that if all banks agree to lower deposit rates, the capital cost will fall, offering lenders a chance to cut their lending rates.

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Banks further hike gold deposit rates

HCMC – Several banks have continued to raise interest rates for gold deposits to between 1% and 2% per annum from just 0.1% a month ago.

The highest gold rate is offered by Nam Viet Commercial Bank, at 2% per year for the 11-month term, 1.5% for the three-month term, and 1.55% for the six-month term.

The race to hike gold rates was triggered two weeks ago when Asia Commercial Bank (ACB) and Vietnam Export Import Commercial Bank (Eximbank) boosted deposit rates for gold to around 1%. ACB offered 1.1% per year for a three-month term while Eximbank quoted it at 1% for a one-month term.

ACB on Monday heated up the race by raising the annual interest rate by between 73 and 85 basis points to 1.35% for the 12-month term and 1.3% for terms of three, six, and nine months.

Late last week, Southern Commercial Bank also revised up its gold deposit rate with the highest level being 1.5% per year for terms longer than five months. Sacombank now mobilizes the yellow metal at 1% per year for a three-month period.

A banker in HCMC’s District 1 said the higher deposit rate was offered to attract more gold to meet the rising demand.

“Many people think the gold price has hit the ceiling so they want to borrow gold now to enjoy a lower lending rate (compared to Vietnam dong or the U.S. dollar),” he said.

Mobilizing more gold and dollars at this time will also help banks improve their current capital pools to meet a new rule on keeping the loan-to-deposit ratio at no more than 80% under the central bank’s Circular 13, he explained.

According to the central bank’s HCMC Branch, as of end-August, the loan-to-deposit ratio of banks in the city had been about 96.3%, as mobilized funds totaled VND683.5 trillion compared to outstanding loans of VND623.1 trillion.

Ho Huu Hanh, director of the branch, said gold deposits made up 10% of the total mobilization by credit institutions in the city.

Hanh commented on the ‘gold rush’ that many banks who had sold mobilized gold earlier to take Vietnam dong for lending now had to draw more gold to offset the loans made.

As the dollar and gold interest rate are increasing now, banks find it hard to lower the lending rate in near term as told by the central bank, said a banker in HCMC.

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Banks’ profits shrink after auditors’ review

HCMC - Many banks have seen their profits shrink substantially after auditors made reviews on their consolidated half-year financial reports.

Saigon Thuong Tin Commercial Bank (Sacombank) saw its after-tax profit reduced by 35.5% to VND415.32 billion after its half-year financial report was audited.

The re-examined report showed that Sacombank suffered a loss of VND128 billion from money and gold dealings and a loss of VND529.7 billion from revaluation of its currencies and gold assets. This is also the main reason for the big difference between the two reports.

Similarly, Asia Commercial Bank (ACB) reported VND1.57 trillion in pre-tax profits in the first half this year, but the figure then plunged to VND1.33 trillion after the review by the auditor. The main reason for the 18.1% reduction was that the income from financial investment and stock investment tumbled from VND297 billion to VND47.7 billion.

In addition, according to ACB, in the first six months of the year, the mother bank accounted VND290 billion of profits in the previous year from subsidiaries into its financial statement, but the audited report left out this sum.

Similarly, Vietnam Export-Import JS Bank also saw its after-tax profit fall from VND822.8 billion in its initial report to VND712.7 billion in the audited report.

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Access to dollar loans grows harder

HCMC – Enterprises will find it more difficult to take out bank loans in the U.S. dollar from now to the end of the year given the banking system’s slower mobilization and the country’s trade deficit reduction effort.

Dinh The Hien, a member of the advisory board of Vietnam Export Import Commercial Bank (Eximbank), said that in the first half of this year when lending rates in dong were much higher than those for the dollar and the forex exchange rate was stable, enterprises benefited much from getting dollar loans.

However, from now to the year-end this advantage will disappear as banks will have to cut lending rates for Vietnam dong funds at the request of the Government, thus either reducing or abolishing the difference between dollar and dong interest rates, Hien added. Many banks are offering lending rates of 12% to 13.5% a year for enterprises at the moment.

Meanwhile, Tran Hoang Ngan, a member of the National Financial and Monetary Policies Advisory Council, said the State Bank of Vietnam had asked lender banks to limit dollar loans to help curb the trade deficit so it would be hard for enterprises to access dollar funds.

Sharing Ngan’s view, Pham Duy Hung, general director of Vietnam Asia Commercial Bank (VietA Bank), said his bank was giving priority to exporters who had dollar revenue.

Since last week, some major lenders such as Asia Commercial Bank (ACB) and Eximbank have raised their interest rates for U.S. dollar deposits to a maximum of 4.45% a year while some other joint-stock banks have increased their dollar deposit rates above 5%.

That shows dollar mobilization could not meet demand for dollar loans at banks. In fact, growth in U.S. dollar credit at banks in HCMC alone was 28.8% in the first seven months of the year while credit growth in Vietnam dong was only 5.1%, show figures of the central bank’s HCMC branch.

Meanwhile, according to figures of the National Financial Supervisory Committee, outstanding loans in the dollar in the banking system have exceeded dollar mobilization by VND40 trillion, equivalent to US$2.05 billion. Therefore, the possibility of banks increasing outstanding loans in the dollar in the rest of the year is small, experts said.

Ngan said export enterprises could borrow dollars as they had foreign currency income to pay debts and the forex rate risk would not be a problem for them. Meanwhile, other enterprises should receive loans in Vietnam dong as banks have reduced their lending rates for the local currency and put on many programs to boost their credit growth in Vietnam dong following their targets for the year.

For example, Asia Commercial Bank (ACB) has announced a VND3 trillion budget to give out loans for enterprises at preferential rates. An Binh Commercial has an unsecured loan program for small and medium enterprises, and Vietnam International Commercial Bank has a credit line of VND1.5 trillion for financing wood processing enterprises.

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