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Funds seen ample at commercial banks
Even though interest rates on the inter-bank market fell considerably for all short terms of less than one month last week, showing signs of weaker capital demands among banks, lenders are still sitting on huge amounts of money.
Due to poor capital demands for long terms, most of monetary transactions in the inter-bank market last Wednesday were short terms, from overnight to two weeks.
Interest rates in the market hovered around 4-4.5% annually for overnight to one-week terms, 4.5-5% for two to three weeks and 5.5-6% for one month. The rates sharply tumbled compared to July 5 when the annual rate of two to three weeks stayed at 5.5-7% and that of one month stood at 7-7.5% as recorded by BIDV.
Last Monday the inter-bank rate maintained at 4-5% for overnight to one week, 5.5-6% for two to three weeks and 6.5-7% for one month. However, liquidity of the local currency in the market still remained high with demands and supplies staying stable.
It is noted that in the last week of June, the inter-bank dong interest rate shot up to 8-9% for overnight to one-week terms from the previous 3-3.5%. Market observers attributed the sharp rise of the rate to lenders’ moves to borrow money to beautify their performance reports in the second quarter.
In the mean time, open market operations (OMO) on July 11 continued failing to attract bidders, with a mere 19 billion dong worth of valuable papers registered out of 5 trillion dong offered. It is believed the fact that the central bank had kept the floor OMO rate higher than the dong rate offered in the inter-bank market rate has discouraged credit institutions from participating in actively.
Bao Viet Securities Co. analyzed that ample money supplies at several local banks plus low credit growth have resulted in the quiet trading situation of OMO as seen in the preceding week.
In fact, the lending rate via OMO now has dipped by two percentage points from the previous month to 8% a year but it is still higher than the rate of short terms in the inter-bank market, meaning commercial banks are still holding large amounts of money.
According to the HCM City Branch of the central bank, total mobilization value of lenders in the city reached some 940 trillion dong as of end-June, up 5.21% against late 2011 and 1.03% higher month-on-month and nearly 12% year-on-year.
As such, the mobilization growth at local banks is still higher than their credit growth, which barely increased in the year’s first half. The loans-to-deposit ratio at 14 banks in the city now is 68.3% compared to 92.7% in end-2011.
The Saigon Times
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