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Banks lavish loans on Delta agriculture
The Cuu Long (Mekong) Delta's strong showing in agriculture and aquaculture has become a magnet for many commercial banks, particularly those from the north of the country, looking to expand their business in coming years.
Adding to the presence of native banks like KienlongBank, MHB and LienVietBank, other commercial banks have expressed interest in setting up operations in delta provinces.
They include the Ocean Joint Stock Commercial Bank (Oceanbank) and the Orient Joint Stock Commercial Bank (OCB) who have just received permission from the central bank governor to open branches in Can Tho City and Soc Trang Province, respectively.
A week ago, the Bao Viet Joint Stock Commercial Bank officially inaugurated its branch in the Can Tho City.
Earlier, a series of commercial banks from the northern region, namely Techcombank, VIB, VPBank, Maritime Bank and TienphongBank, also opened branches or representative offices in the delta.
Not just domestic banks, many foreign credit institutions have also got their eye on this market with high potential.
The Hongkong and Shanghai Banking Corporation (HSBC) has already opened a branch in Can Tho City.
The Cuu Long (Mekong) Delta region, with its population of about 17 million (21 per cent of the country's total) and more than 4 million ha of arable land, is the country's biggest agricultural and fisheries producer. The region accounts for 50 per cent of the country's total rice production and 52 per cent of its total fisheries.
With such advantages, the delta now is considered a highly lucrative market for the development of banking services.
Explaining the presence of many northern banks in the delta, Dang Thi Tuyet Dung, Deputy General Director of Techcombank, said these banks had completed plans to build networks in northern provinces so they were seeking new markets.
Opening its branch in the Can Tho City was one of HSBC's strategic steps in its commitment to the Government to operate for a long time in the country, said general director Thomas Tobin.
Pham Huy Hung, Chairman of VietinBank, said his bank had been present in the Cuu Long (Mekong) Delta for many years and gained several positive business results.
Interest rates climb
Since the central bank hiked all key rates early this month, commercial banks have begun yet another round of raising both deposit and lending rates on dong accounts.
They have also launched a string of promotions such as cash and rate bonuses, as well as valuable gifts to keep and attract deposits.
In fact, interest rates at many commercial banks in the city have come close to 14 per cent per year, beyond the 12 per cent level agreed to earlier by the banks themselves.
The Southeast Asia Joint Stock Commercial Bank (SeABank) was one of the fastest in raising deposit rates. It now offers an interest rate of 13 per cent interest on 12–13 month deposits.
Since November 20, the Nam A Joint Stock Commercial Bank (Nam A Bank) has been offering its highest rate of 13.8 per cent for six-month deposits of VND2 billion ($102,564) or more.
The highest interest rate on dong deposits offered by the Ha Noi-Sai Gon Joint Stock Commercial Bank has gone up to 13.5 per cent.
The Viet Nam Thinh Vuong Joint Stock Commercial Bank (VPBank) also offers 13.5 per cent on 13-month deposits.
At the Viet Nam Asia Joint Stock Commercial Bank (VietABank), the highest deposit rate posted outside the bank was 12 per cent on November 22, but quotations handed to customers inside the bank were higher if bonus rates were tagged on.
For example, the interest rate on two-month deposits was 13.5 per cent, 13.7 per cent for three-month deposits, and 14 per cent for terms of four months or longer. For deposits above VND500 million ($25,641), customers could get even higher rates of 14.5 per cent.
In addition to raising interest rates, commercial banks have also used several promotions including cash and rate bonuses, and valuable gifts for attracting high value deposits.
Independent banking experts explained the interest rate hikes as a way for banks to avoid the possibility of having their capital-bases attracted by other banks.
The difficulties often faced in raising capital towards the end of the year was another reason, they said.
It is likely that interest rates on deposits (And therefore on loans) could go even higher.
Already, enterprises are having to struggle with interest rates of 17.5 to 20 per cent as banks cope with the spike in borrowing costs.
Processors feel squeeze
Food producers constrained by their participation in the Government's price stabilisation programme have had to tighten their belts and reduce profit margins as input costs soar.
In most cases, the interest-free credit that participating firms get as an incentive for freezing their output prices has not been sufficient to cover the extra input costs.
As companies gear up for the upcoming Tet (Lunar New Year) festival season in February by preparing enough food to meet increasing demand, the rising input costs and bad weather conditions are making it very difficult for them to maintain selling prices that are lower than the market price.
Le Thi Thanh Lam, Deputy Director of the Sai Gon Fish Company, said her company had been confronted by a "price storm" of input materials.
Prices of tra fish and other marine products that her factories needed to supply the domestic market had risen by 20 per cent compared with those at the beginning of the second quarter.
This is excluding other costs such as transport and labour, which have also gone up by 10-15 per cent on average, while output prices cannot rise by more than 10 per cent.
To minimise the loss, her company is negotiating with supermarket chains for an 8 per cent price increase, but many have not accepted the proposal.
Pham Thi Huan, Director of Ba Huan Company that specialises in egg production, said her company joined a price stabilisation programme in HCM City in June 2010 when material prices were much cheaper.
The price surge over the past month was due to natural disasters like typhoons that hit many parts of the country, she said.
In addition, crop and livestock diseases and epidemics had resurfaced.
The soaring exchange rate between the US dollar and the Vietnamese dong is also a significant obstacle for companies taking part in the programme.
Furthermore, the fees that livestock and poultry meat pay for quarantine, certification and other services have also risen sharply, some by as much as 100 per cent.
Ba Huan Company received an interest-fee, preferential loan of VND9 billion ($461,538) as a programme incentive.
According to Huan, with the company's present sales, the loan is not enough to cover them for a week.
The company has set up over 700 retail outlets in the city with stable selling prices, but at the current levels, it would be hard for the company to achieve its profit targets.
To prevent a price hike at the end of the year, the company has continued to negotiate with farmers for stable supply prices.
It will also try to renegotiate deals with feed suppliers for large quantity purchases at cheaper prices.
Many companies that are not part of the price stabilisation programme are also under pressure to maintain their prices.
Once their product quality and brand names have been accepted by consumers, an increase in prices would dent the their competitiveness before the Tet holidays.
Thien Ly
vietnamnews
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