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Dong funds build up as rates rise
Commercial banks in Vietnam have started building up surplus funds in the dong as higher deposit rates lure depositors but are still short of dollar funds, bankers said Monday.
Last Monday, Vietnamese banks raised interest rates after the central bank removed a 12-percent ceiling on dong deposit rates and raised three other key rates to fight a surge in inflation.
“So far there has been a surplus of working capital at banks,” the State Bank of Vietnam, or the central bank, said in a money market review for the week ending last Friday.
The review said state-run and foreign banks had a higher dong fund surplus while joint-stock banks had lower surplus.
Banks offered different ways to boost dong funds, from giving 15 percent per year to working extra hours late last week to better serve clients, they said.
As banks pay higher rates on deposits, they have also started raising rates on lending to around 18 percent per year.
Tuesday, major lenders raised the rates on overnight dong loans on the interbank markets to 15 percent, from 9-11 percent a week ago.
They charged the six-month dong loans at 18 percent, up from 10-14 percent a week ago.
Several foreign banks already offered their six-month and 12-month loans at 18 percent.
Last week, the central bank set the base rate for dong deposits and loans at 12 percent and said banks could offer rates of up to 18 percent.
Saigon Thuong Tin Commercial Bank (Sacombank), Vietnam’s sixth-largest lender by assets, said it raised dong-deposit rates of up to six months to between 13.62-13.86 percent to attract “free funds kept by the public and in line with corporate business plans in the short term.”
The rate hike also contributed to stabilizing market rates and preventing funds from being shifted from one bank to another, said Sacombank which listed on the Ho Chi Minh City Stock Exchange, Vietnam’s main board.
To help banks boost liquidity, the central bank said it extended buying short-term debt papers worth VND31 trillion ($1.9 billion) from banks via open market transaction last week at interest rate of 12 percent per year.
Meanwhile, as Vietnam reported a widening trade deficit, banks continued to face dollar shortages, the central bank’s review said.
Vietnam estimated its trade deficit in the first five months of the year would be $14.4 billion, more than three times higher than in the same period last year after a jump in imports, the government said Monday.
January-to-May imports would rise 67 percent to $37.8 billion while exports would only rise 27.2 percent from the first five months of 2007 to $23.4 billion, the General Statistics Office (GSO) said in its monthly report.
Global oil prices have surged this year, inflating Vietnam’s energy import bill.
The government report said the country would spend $4.9 billion for oil products in the first five months, a surge of 68.7 percent from the same period last year.
The Southeast Asian nation had a trade deficit of $4.23 billion in the first five months of last year.
The central bank allowed the official exchange rate to rise to VND16,060 per dollar Tuesday, the highest in nearly three months since February 28 when the greenback stood at VND16,052.
The GSO estimated Tuesday that annual inflation accelerated to 25.2 percent in May from 21.4 percent in April, its seventh consecutive double-digit reading and one of the highest in Asia.
Monthly inflation data are not fully available but the inflation rate in May could be the highest since 1991 when Vietnam reported its annual inflation at 67.5 percent.
Thanhnien
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