Gold deposit interest rates increase

Interest rates for gold deposits suddenly soared, ranging from a low of 0.5 percent to a high of 1 percent in response to a dramatic rise in the global gold market last week.

The trend of increasing gold deposit interest rates was initiated by large banks but is now picking up in smaller banks.

The highest increase, 1.1 percent per year, in three-month gold deposit interest rates came from the Asia Commercial Bank (ACB).

Phuong Nam Joint Stock Commercial Bank raised their interest rates to 1 percent, from a stable 0.55 percent, based on a different set of terms; Sacombank has doubled its three-month gold deposits interest rates to 1 percent; and Dai A Joint Stock Commercial Bank hiked up their interest rate to at least 0.15 – 0.6 percent.

An official at a small commercial bank revealed that his company needed to increase gold deposit interest rates in order to stave off competition from other banks.

Deputy Director of ACB Do Minh Toan said that many customers believed that the price of gold was too high and expected gold prices to drop soon. As a result, they borrowed gold with a low lending interest rate. To avoid risks, some customers paid premiums to buy insurance for gold borrowing.

General Secretary of the Vietnam Banks Association Duong Thu Huong said that increasing interest rates may be a mechanism for banks to comply with the State Bank of Vietnam's new guidelines requiring banks to raise their capital adequacy ratio from 8 to 9 percent.

Senior consultant of the World Gold Council Huynh Trung Khanh said that commercial banks and investors should be cautious as gold prices will continue to increase due to high global demand for gold.

Experts said gold was in short supply because businesses collected gold in their domestic markets for export. According to the General Statistics Office, Vietnam exported US$1.34 billion worth of gold, equivalent to about 36 tons.

In August alone, Viet Nam exported $768 million in gemstones and precious metals, most of which was gold. However, gold imports were scarce in comparison leading to a gold supply shortage in the domestic market.

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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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Gold deposit interest rates increase

Interest rates for gold deposits suddenly soared, ranging from a low of
0.5 percent to a high of 1 percent in response to a dramatic rise in the
global gold market last week.

The trend of increasing gold deposit interest rates was iniated by large banks but is now picking up in smaller banks.

The highest increase, 1.1 percent per year, in three-month gold deposit
interest rates came from the Asia Commercial Bank (ACB). Phuong Nam
Joint Stock Commercial Bank raised their interest rates to 1 percent,
from a stable 0.55 percent, based on a different set of terms; Sacombank
has doubled its three-month gold deposits interest rates to 1 percent;
and Dai A Joint Stock Commercial Bank hiked up their interest rate to at
least 0.15 – 0.6 percent.

An official at a small
commercial bank revealed that his company needed to increase gold
deposit interest rates in order to stave off competition from other
banks.

Deputy Director of ACB Do Minh Toan said that many
customers believed that the price of gold was too high and expected gold
prices to drop soon. As a result, they borrowed gold with a low lending
interest rate. To avoid risks, some customers paid premiums to buy
insurance for gold borrowing.

General Secretary of the
Vietnam Banks Association Duong Thu Huong said that increasing interest
rates may be a mechanism for banks to comply with the State Bank of
Vietnam 's new guidelines requiring banks to raise their capital
adequacy ratio from 8 to 9 percent.

Senior consultant of
the World Gold Council Huynh Trung Khanh said that commercial banks and
investors should be cautious as gold prices will continue to increase
due to high global demand for gold.

Experts said gold was
in short supply because businesses collected gold in their domestic
markets for export. According to the General Statistics Office,
Vietnam exported 1.34 billion USD worth of gold, equivalent to about
36 tonnes. In August alone, Viet Nam exported 768 million USD in
gemstones and precious metals, most of which was gold. However, gold
imports were scarce in comparison leading to a gold supply shortage in
the domestic maret./.

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