Last week, the market received information that some banks raised dong deposit rates. There were two new points: there had certificates of concise term deposits (one to three months) with high-interest rates, and six-month short-term interest rates exceeded eight percent per year.
The interest rate hikes from early 2019 had not stopped yet. Dong mobilising interest rates from 8.5 percent to nine percent per year appeared more, even over 10 percent per year.
Unique and long-lasting phenomenon
Only being local, but these developments formed two notable points, though that was not enough to represent the common characteristics in the market.
Firstly, the interest rate curve showed signs of inflating, with short-term interest rates higher than in long terms.
Secondly, the competitive interest rate differential, if calculated individually at the highest level, had reached about three percent per year among memberswhich was rarely seen in many years.
Among these flows, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) had become the only phenomenon throughout 2018 till then: having the lowest dong interest rates and being almost entirely on the sidelines of the increase in the market.
There may be specific differences in some locations, but throughout the beginning of 2018, Vietcombank’s dong deposit interest rates list had remained almost unchanged. The highest was only 6.8 percent per year for 12-month term or more, from nine months and below the highest was only 5.5 percent per year.
Nevertheless, the bank’s capital mobilisation growth remained relatively good in 2018 with 13.3 percent, and the first six months of 2019 increased by more than 8.6 percent.
Thus, with the prolonged phenomenon, was Vietcombank under pressure to compete for deposit interest rates in the market? Whereas, did the prominent member in the ‘big four’ commercial banks of Vietnam have any facilities and solutions to stabilise the interest rate groundinput costs?
At several conferences, Vietcombank leaders once explained that with their prestige in the market, banks strengthened the trust of depositors. Capital mobilisation still grew well despite the lowest interest rates in the system.
That was not enough to explain a phenomenon.
A new challenge is nearby.
In industry correlation, this is a prominent member, with a history of more than 50 years, is a state-owned commercial bank after equitisation still having the State ownership ratio with its own advantages as well as decisiveness in competition.
Typically, for decades and untill now, it has always been the focal point to receive large deposits of the state budget. On the other hand, with the orientation of prioritising using products and services within the sector, Vietcombank belongs to the Central business sector with many corporations. Besides, it is also an vital deposit customer.
Besides these advantages, the phenomenon of “interest rates on the sidelines of the races” at Vietcombank also associated with the identified strategy.
The bank leader explained at Vietcombank’s strategy in recent years: mobilising wholesale and retail credit. Mobilising wholesale was to attract large deposits having a softer cost. Retail credit was to avoid centralised lending, risk dispersion and better marginal profit.
Actively expand payment and collection accounts for the State Treasury and Vietnam Social Security. Promote cooperation in state budget collection through successful agreements with several credit institutions to use the State Treasury’s account at Vietcombank as a priority channel for state budget revenue transactions. Closely coordinate and expand the provision of revenue or expenditure services for Vietnam Social Security. All of which were potential clues toward the significant deposit sources highlighted by Vietcombank’s 2018 Annual Report, clearly shown in the newspaper financial statements.
Focus on large IPO transactions for foreign currency conversion. Keep close to businesses planning to divest, potential investors to access related services. According to the report, Vietcombank used to be the destination of the money amounting to about 110 trillion dong of State deal of Sabeco divestment.
In final results, in the first six months of 2019, there had not been specific analysis yet. However, at the end of 2018, the strategy of “mobilising wholesale” clearly showed: the proportion of capital mobilisation from economic organisations increased in structure, from 45.8 percent in 2017 to 48.8 percent, while the percentage from fish decreased from 53.9 percent to 51.2 percent respectively.
As above, Vietcombank had been on the sidelines of interest rate hikes since 2018, which was the lowest level in the market. However, capital mobilisation had grown well and moved as strategic.
On the other side, a new challenge for Vietcombank’s capital mobilisation was approaching. According to a document issued by the Ministry of Finance at the end of August, from November 1, the payment deposits of the State Treasury would transfer to the focal point at SBV’s Transaction Office.
