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Bank deposit rates up on higher credit demand
Dong interest rates have risen slightly this week as banks need more funds to lend under a government campaign to avert a deeper economic slowdown.
The highest increases were on overnight loans and one-week loans, Reuters data showed. Rates on overnight loans rose to 6.83 percent on Monday from 6.18 percent a week ago.
While banks were charging higher between themselves, several lenders said they also raised rates on dong deposits to attract more funds to meet lending requirements under a government program.
Economic growth slowed last year to its slowest pace in almost a decade of just 6.23 percent after being hit first by soaring prices and then the global financial crisis.
The government has announced a US$6 billion stimulus plan and the central bank has been trying to spur economic activity through a series of interest rate cuts and other measures to boost lending. The government agreed on January 15 to use about $1 billion from the stimulus plan to subsidize loan interest by 4 percent for local businesses.
In a statement, the State Bank of Vietnam, the central bank, said it has asked banks to expand credit, provide funding guarantees for small - and medium-sized enterprises and implement the government’s interest rate compensation plan.
VPBank, 15 percent owned by Oversea-Chinese Banking Corp., said for the first time this year it has increased rates on dong deposits, paying 0.15-1 percent more for fresh funds as of February 18.
“VPBank adjusted rates to stay in line with market movements to ensure enough funds to meet credit demand,” Deputy Chief Executive Nguyen Thanh Binh of Hanoi-based VPBank said in a statement.
It paid a 12-month dong saving rate of 7.6 percent, well above the average rate of 7.27 percent offered by other partly private banks in the week ending last Friday, the State Bank of Vietnam said in its weekly review.
Binh told Lao Dong newspaper his bank plans to lend companies VND6 trillion ($344 million) under the government loan subsidy program and has so far disbursed VND300 billion ($17 million).
Hanoi-based Ocean Commercial Joint-Stock Bank, or OceanBank, last Thursday raised interest rates on deposits of nine months and above by 0.2-0.7 percent.
Later, Techcombank, partly owned by HSBC Holdings Plc, increased saving rates by 0.1-0.75 percent. The highest increase was on 36-month deposits, from 6.95 percent to 7.7 percent per year. The bank plans to lend VND50 trillion ($2.9 billion) at reduced interest rates.
Meanwhile, gold prices tracked a surge in world prices last week, affecting banks’ funds, bankers said.
Gold rose about 5 percent in the past week to nearly VND20 million ($1,178) per 37.5-gram (1.3 ounce) tael Monday, prompting residents to sell the metal while other private investors bought in with hope of higher gains.
“Signs have emerged that customers are withdrawing deposits to invest in more profitable channels like real estate, gold and forex,” Lien Viet Bank Chief Executive Nguyen Duc Huong was quoted Sunday by the online VnExpress as saying.
Bankers said it is hard to say right now if there would be a general hike in savings rates among banks. But they said all local banks are trying to attract more deposits as the entire banking system is expanding credit under the government loan program.
Total deposits in Ho Chi Minh City rose 20.2 percent at the beginning of this month from a year ago, reaching VND587.5 trillion ($33.54 billion), the city statistics office said. Total loans increased at a lower rate, by just 13.2 percent year-on-year, to VND501 trillion ($28.7 billion).
A senior executive at the Joint-Stock Commercial Bank for Foreign Trade of Vietnam, or Vietcombank, told Thanh Nien that in theory, banks only try to increase deposits when they lack funds.
But some commercial banks cut their deposit rates too much recently, losing customers, and now have to increase their rates again, said the executive, who wished to remain unnamed.
Vietcombank last month reported pretax profit rose 9.7 percent last year as both loans and deposits increased.
Nguyen Le Dieu Tho, deputy general director of the HCMC-based Saigon Commercial Bank, said banks have to consider carefully before raising or lowering interest rates or otherwise would end up having to make many readjustments later.
She told Thanh Nien her bank is not planning to increase savings interest rates because they are still attractive compared to those offered by other banks.
ThaNh nien, vietnamplus
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