Banks are racing to raise capital to boost lending in the coming quarters, although the credit growth target for the whole year is 14 percent.
Pham Thanh Ha, director of the Monetary Policy Department, State Bank of Vietnam (SBV), said that as of 25th March 2019, credit of the whole economy increased by 2.28 percent compared to the end of 2018.
With this growth momentum, according to a leader in the banking industry, outstanding loan growth will be higher in the coming quarters and there may not exclude the possibility that some banks will soon run out of credit room. Previously, this situation occurred in many banks in the fourth quarter of 2018, due to facilitating credit growth during the middle of the year.
In fact, in 2018, with the policy of controlling credit growth at an appropriate level, the banking sector only experienced credit growth of 14 percent, although the target set at the beginning of the year was 17-18 percent and this movement is expected to continue in 2019.
However, some banks set high credit growth targets this year. For example, Vietnam International Joint Stock Commercial Bank (VIB) has set a target of 35 percent of credit growth and expects for SBV approval since the bank has successfully applied Basel II standards. Similarly, Orient Commercial Joint Stock Bank (OCB) also expects to loosen the credit growth room, when SBV issued a certificate of successful application of Basel II standards for this bank.
Expectation of strong increase in capital demand in the coming months is the reason for the current capital mobilisation race, although it’s not easy for credit to increase sharply. In its issuance of dong deposit certificates in January 2019, Saigon-Hanoi Joint Stock Commercial Bank (SHB) announced interest rates up to 8.6 percent per annum (p.a.), 8.7 percent p.a. and 8.8 percent p.a., corresponding to the tenor of 18, 24 and 36 months.
Dong deposit rates for long tenors of over 18 months at Viet Capital Commercial Joint Stock Bank (Viet Capital Bank) are at 8.6 percent p.a. Meanwhile, Saigon Joint Stock Commercial Bank (SCB) applies interest rate of 8.55 percent p.a. for tenors of 13-36 months. Notably, the interest rate for online savings with tenors of 13 months or more at this bank is up to 8.95 percent p.a.
In recent years, to encourage customers to use online savings products, banks have increased interest rates sharply with the difference compared to making deposits at counters of up to 1 percent p.a. for 6-12 month tenor. Specifically, compared to the interest rate of deposits made at the counter, the online savings interest rate of Asia Commercial Joint Stock Bank (ACB) is 0.3 percent p.a. higher, of An Binh Joint Stock Commercial Bank (ABBank) is 0.2 percent p.a. higher, of Vietnam Public Joint Stock Commercial Bank (PVcomBank) is 0.2 percent p.a. higher. In particular, recently, Nam A Joint Stock Commercial Bank (Nam A Bank) has adjusted the interest rate of online savings deposits to 8.2 percent p.a. and 8.0 percent p.a. for 12-month and 6-month tenors respectively, higher than interest rates for deposits made at counters from 0.4-1 percent p.a.
Hoang Viet Cuong, director of Nam A Bank’s Business Division said that the bank’s online savings interest rates were raised to increase benefits for customers. For not too large deposit amounts, from 50-100 million dong, customers who choose the online savings can minimise banking procedures.
Besides, in order to attract idle money, banks are applying various types of promotions according to each customer segment. For saving customers, the most popular promotion is raising interest rates by 0.1-0.3 percent p.a. For example, from now to 30th June, depositors at Hochiminh City Development Joint Stock Commercial Bank (HDBank) are entitled to an additional interest rate of 0.1 percent-0.4 percent p.a. Nam A Bank awards additional interest rates up to 0.2 percent p.a. for depositors.
Analysts said that the ratio of short-term capital used for medium and long-term loans decreased from 45 percent to 40 percent from the beginning of 2019, so banks tend to push for fund mobilisation, especially for long tenor. Meanwhile, the liquidity is somewhat tightened shown obviously via the interbank interest rate raised sharply.
The cause may come from the pressure of balancing capital to ensure the compulsory reserve ratio in the last week of March 2019. It does not exclude the possibility that the State Treasury has just withdrawn deposits from big banks affecting the system liquidity.
According to the report of Bao Viet Securities Company (BVSC), in the week of 25th -29th March, SBV issued 4.9 trillion dong via Treasury bill (7-day tenor with interest rate still at 3 percent p.a.), while there were 37.5 trillion dong matured in the week. Meanwhile, through Open Market Operation (OMO), SBV net withdrew 1.094 trillion dong. Thus, summing up the two channels, SBV net injected 31.506 billion dong in the last week of the first quarter of 2019.
Interbank interest rates for overnight tenor last week also increased from 3.15 percent to 4.15 percent p.a. Rates for one week and two week tenors increased from 3.2 percent and 3.4 percent to 4.25 percent p.a. However, BVSC forecasts that banks’ deposit rates will continue to be stable in the near future. The expected interest rate increase for the whole 2019 will be below 0.5 percent p.a.
