Not only in the long term, many banks are increasing deposit rates in both short and medium term to restructure the capital, meeting the roadmap to reduce short-term capital for medium and long-term loans, making the mobilisation competition fierce
Banks raise deposit rate
Currently, to increase competitiveness, many bankers raised the medium-term deposit rate to the highest level. For example, VietNam Asia Commercial Joint Stock Bank (Viet A Bank) increased the seven-month term interest rate to 8.4 percent per year. At Sai Gon Hanoi Commercial Joint Stock Bank (SHB), nine-month term deposit interest rate raised to 8.2 percent per year. However, in smaller banks, such as One Member Limited Liability Vietnam Construction Bank (CBBank) or An Binh Commercial Joint Stock Bank (ABBank), customers have to save for a longer term, from 12 months or more to receive an interest rate of eight percent to 8.2 percent per year.
Saving for a long time has always been an investment channel that many people choose because they can be both profitable and secure, especially when the savings interest rate is in the increasing trend.
Accordingly, the strategy to increase the attractiveness of idle funds by offering many “instant” benefits through gift promotions, raising interest rates, combined with the construction of new products, tailored to customer needs. Therefore, competition to mobilise deposits between banks has never stopped exciting.
For example, at HCM City Development Joint Stock Commercial Bank (HDBank), customers only need to deposit 10 million dong to have a chance to win 1 billion dong. Or at Vietnam International Commercial Joint Stock Bank (VIB), when depositing, customers will receive a range of interest rate incentives such as an additional interest rate of 0.1 percent per year, one percent per year interest rate on all interest, etc.
Ho Van Long, director of VIB Retail Banking, said that customers desired a reputable and safe bank, with the most competitive prices and incentives, the best customer service to save money. Currently, VIB applied interest rate of 7.2 percent to 7.6 percent per year with terms of six to 12 months and from 7.5 percent to eight percent per year with terms of 15 months or more.
VIB wanted to change the mindset that saving was a passive form of profit. In fact, the amount of savings could increase many times if the customer had an effective financial solution.
Race to issue bonds
Not only did the interest rate increase, many banks also raced to issue long-term bonds with high interest rates to increase capital mobilisation. For example, Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) had successfully issued 3.1 trillion dong of 10-year bonds in the form of private issuance, fixed interest rate of 7.35 percent per year. This is a non-convertible bond with no warrants and security assets.
The amount of capital mobilised would be used to increase working capital, improve capital mobilisation structure, ensure compliance with the roadmap to reduce short-term capital for medium and long-term loan of the State Bank of Vietnam (SBV).
HDBank also stated that it would issue a maximum of 3 trillion dong of bond in 2019 with a total face value of 3 trillion dong. Previously, HDBank completed mobilising 5 trillion dong through bond issuance (five times). According to a representative of that bank, that amount had been added to medium and long-term capital, helping to increase the scale of operating capital, improving the coefficient of using short-term capital for medium and long-term loan.
As of July 2019, Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) successfully issued 5.9 trillion dong of domestic bond and just issued an additional $300 million of international bond in the total issuance plan of $1.12 billion. From the beginning of the year until now, Asia Commercial Joint Stock Bank (ACB) mobilised $7.85 trillion dong, VIB was 5.1 trillion dong from bond issuance. In 2019, Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) plans to issue 10 trillion dong of bond, Vietnam Export Import Commercial Joint Stock Bank (Eximbank) plans to issue 5 trillion dong of individual bond, etc.
Input costs increase, interest rates are hard to drop sharply
After the move of the US Federal Reserve System (Fed) to lower US dollar interest rate, many central banks around the world also adjusted interest rate, which helped reduce the pressure on the exchange rate.
Accordingly, recently, many banks reduced lending rate, but the reduction was not much. In the context of stable macroeconomic condition, lending rate is expected to fall further to support people and businesses. However, due to the current operation of banks, lending rate is forecasted to be hard to reduce, especially for long terms.
Nguyen Van Thuan, a finance and banking expert, said that banks’ deposit interest rate could increase when many businesses were issuing high-interest bonds up to 13 percent to 14 percent per year to attract idle capital. In contrast, lending interest rate was difficult to reduce due to increasing capital mobilisation costs, in addition to pressure to restructure capital sources to limit the use of short-term capital for medium and long-term loan.
According to Bao Viet Securities Joint Stock Company (BVSC), the interest rate could be adjusted down in some priority areas, but it was not enough to establish a new lower interest rate level.
