Not the credit demand, inflationary or liquidity pressure, more and more attractive investment channels are making banks think of ways to raise money.
Credit is slow, liquidity is not under pressure, interest rate still rise
According to a survey of reporters, up to now, there have been over a dozen banks offering long-term interest rate up to over eight percent per year, such as Tien Phong Commercial Joint Stock Bank (TPBank), Nam A Commercial Joint Stock Bank (Nam A Bank), Viet Capital Commercial Joint Stock Bank (VietCapitalBank), An Binh Commercial Joint Stock Bank (ABBank), Sai Gon Joint Stock Commercial Bank (SCB), etc. Even banks mobilised capital with interest rates above nine percent per year through the form of deposit certificate. Not only increasing interest rate, since the beginning of the year, banks also raced to issue bonds to mobilise capital with attractive interest rates.
According to the general Statistical Office, the average Consumer Price Index (CPI) of seven months of 2019 increased 2.61 percent compared to the same period in 2018, meaning that the inflation pressure was very low. According to the State Bank of Vietnam (SBV), the liquidity of the system was still good (showing that the interbank interest rate tended to decrease), the credit in the first six months of the year only increased by 7.3 percent.
Dinh The Hien, an economic expert, said that, this year, SBV continued to control the credit growth target at a low level, so commercial banks did not need money.
Not the pressure of inflation, liquidity or credit demand, so what is the reason why banks raise deposit rates?
An interesting point is that deposit rates are gradually differentiating. Banks with high deposit rates are mainly small banks that have not reached Basel II standards, or those banks that have medium and long-term loans accounted for a large proportion. Meanwhile, interest rate in large banks are still quite stable.
Therefore, Bui Quang Tin, an economic expert, said that the increase in deposit rate recently was not worrying. That was only a move to restructure banks’ capital, in order to meet SBV’s regulation on gradually reducing the ratio of short-term capital for medium and long-term loans and increasing Tier two capital to meet Basel II standards.
Bonds, gold and real estate are making cash flow scattered
Although affirming that it only adjusted interest rate for some long terms and only for the moment, the leader of a bank still had to admit that gold, real estate and corporate bonds are causing banks to calculate to increase their ability to raise capital.
Recently, many real estate enterprises race to issue corporate bonds with an interest rate of 11 percent to 12 percent per year, causing the cash flow into the bank to be competitive, not to mention the real estate market is also attracting cash flow. In addition, from the beginning of the year until now, gold price has risen quite strong, making money flow dispersed.
“From the beginning of 2019 until now, the gold price has increased by 10 percent, while the annual deposit interest rate is only seven percent to eight percent per year. Therefore, the rising gold price will stimulate speculation, reduce domestic savings”, warned Le Xuan Nghia.
However, according to Can Van Luc, although long-term deposit interest rate increased, the lending interest rate level with priority sectors remained stable under the direction of the government of Vietnam. Of course, interest rates with non-priority sectors might be affected.
In the last months of 2019, experts said that long-term interest rate might continue to increase slightly, because the demand for increasing Tier two capital of banks was still very large. However, if the Federal Reserve System (Fed) made a decision to lower interest rate in the policy session starting the next day (August 1, Vietnam time), the pressure to raise interest rate would be reduced. In addition, lending rate for priority areas remained stable under the direction of the government.
However, lending rate for risky sectors such as real estate would be affected. “It will be difficult for large increases in interest rate. However, investment motivation and real estate speculation thanks to low interest rate capital is no longer available. Investors who borrow real estate with high loan rates (60 percent, 70 percent) will face an increase in interest rate after the support time of investors”, warned Dinh The Hien.
