The recent three-month prolonged race among banks has pushed the deposit rate up to nearly 10 percent per year. This forced banks to seek other ways to raise capital but not break the State Bank of Vietnam (SBV)’s regulations.
During last week, some banks continued to increase the saving rate. Two months ago, lenders mostly raised long term deposit rate, currently banks have switched to raise saving rate for short terms.
From November 4, Saigon-Hanoi Commercial Joint Stock Bank (SHB) adjusted the deposit rate up by 0.04-0.55 percent/year for its progressive saving product. With this new deposit rate benchmark, SHB’s lowest progressive saving rate is also up to 9.2 percent per year for one month term and deposit worth less than 500 million dong.
Earlier, at the end of October, SHB adjusted up by 0.25 percent/year for terms of six and nine months of its progressive saving product. The banks also increased saving rate by 0.3 percent/yr for three-month term flexible principle withdrawal product. After this adjustment, SHB’s highest saving rate is 9.72 percent/yr.
From the start of November, Southeast Asia Commercial Joint Stock Bank (SeABank) raised deposit rate of dong, US dollar and euro. The dong deposit rate was adjusted up by 1.2 percent/yr against previous saving rate benchmark to the highest level at 9.72 percent/yr. The US dollar saving rate was also adjusted up by 0.7 percent pa to the highest level at 3.6 percent pa. At the same time, the deposit rate of euro was also increased to the highest level of 1.75 percent pa.
Meanwhile, Saigon Commercial Joint Stock Bank (SCB) increased dong saving rate by 0.05-0.25 percent/yr for short terms.
However, banks will be hard to rise saving rate any more because the gap between deposit rate and lending rate is now too narrow at below 1.5 percent. If banks continue to increase deposit rate, they would not able to earn profit. State Bank of Vietnam (SBV) also recommended banks should pay more attention to credit safety. Especially, the basic rate will be maintained in forthcoming time.
In fact, although deposit rate has increased but deposit growth has decreased gradually quarterly. According to statistic from central bank, the capital mobilisation growth capacity from now till the end of this year is very low.
Meanwhile, statistic also showed that outstanding loan growth till the end of September was up to nearly 30 percent whereas capital mobilisation capacity was around 27 percent. This pushed banks face lack of capital.
Thus, the race to raise deposit rate was pushed to the peak. But, facing with the fact that the central bank will not raise the basic rate along with the ceiling lending rate will be controlled, the capacity to raise deposit rate will be impossible. This forced banks to diversify capital mobilisation channels to attract depositors.
Since the start of November, Lien Viet Commercial Joint Stock Bank (LienVietBank) issued certificate of deposits (C/Ds) with the coupon rate of 10.2 percent per year for 24-month term C/Ds in dong and 10.1 percent/year for 18-month term C/Ds.
As for C/Ds in US dollar, the highest coupon rate is at 3.14 percent pa for nine-month term and 2.82 percent pa for six-month term, marking the highest C/Ds coupon rate in the market now.
Another capital mobilisation channel that banks towards is to issue bonds. Most recently, Hanoi Housing Development Commercial Joint Stock Bank (Habubank) succeeded in issuing one trillion dong of long term bonds.
Habubank’s bond issuance aims to raise capital for the bank’s medium and long term capital sources. Habubank will also consider taking full advantages of SBV’s allowable bond issuance limitation.
Maritime Commercial Joint Stock Bank (Maritime Bank) has recently successfully issued 2.1 trillion dong of long term bonds for 2009. Of which, the bank raised 1.8 trillion dong for two-year bonds and 300 billion dong for five-year bonds. The Bank for Investment and Development of Vietnam (Bidv) also raised 1.362 trillion dong from the bond issuance in 2009.
Bond issuance now is considered high liquidity and profit, attractive coupon rate and flexible conditions. Therefore, this is regarded as the most profitable way to attract capital in current market condition.