Money flows out of banks, but bankers do not fear about liquidity

Vietnam dong deposits have been leaving banks since the interest rates were eased to 14 percent per annum. However, bankers have affirmed that this will not in no way affect bank liquidity.

Dam The Thai, Deputy General Director of HDBank, said that over the last three weeks, more than 1000 billion dong have been withdrawn from the bank, and that while there has been no significant growth in the dollar deposits, the mobilized gold volume has increased considerably.

Depositors don’t extend due deposits

Bui Tan Tai, Deputy General Director of the Asia Commercial Bank (ACB), said that a lot of money has been withdrawn from the bank, and a big proportion of the withdrawn money has been injected in the US dollars and gold. According to the General Statistics Office, the gold price has increased by 30.48 percent so far this year and by 61.26 percent over the same period of the last year, while the US dollar price has increased by 7.78 percent.

Deputy General Director of a HCM City-based bank said that the biggest problem for the banks is that the people, who withdraw money, are “big clients” who have big sums of deposits.

The banker said that approximately 70 percent of clients of his banks have the deposits of between 500 million dong and 5 billion dong. And nearly all of them decide to withdraw money when the deposits become mature.

In order to attract more depositors, the banker said, banks have to pay the highest possible interest rate of 14 percent per annum for all kinds of deposits. However, this seems to be not enough to retain depositors, and it is necessary to offer more preferences to please customers.

The bank now offers the 14 percent per annum for demand deposits as well, and 12-13 percent for overnight deposits. Especially, clients now can withdraw money at any time.

After three months of keeping the interest rates for gold deposits unchanged, ACB has decided to raise the gold deposit interest rates. The bank has raised the interest rates of gold deposit certificates for nearly all types of deposits. Especially, 11-month term deposits now have the interest rates of 1.3 percent per annum instead of 1.1 percent per annum. Meanwhile, the 0.2 percent per annum increase has been applied to the remaining types of deposits

Meanwhile, HD Bank has raised the interest rate for short term 364-day gold deposit certificates to 2 percent per annum, and the rate for 3-9 month term gold deposits to 1.5-1.6 percent per annum. This is considered an effective measure to retain money at banks, when people are believed to take money back from banks to purchase gold.

Not only focusing on taking care for customers, banks are rushing to launch promotion campaigns in order to attract more depositors. “Interest rate is not a tool for banks to compete to scramble for depositors any more, because all the banks are offering the same interest rate of 14 percent per annum. Therefore, banks have to launch promotion programs to attract depositors and maintain their market share,” said Thai.

Liquidity not a worry for now

According to the Hanoi Statistics Office, by the end of September 2011, the total capital mobilized by the local banks had reached 746,289 billion dong, a decrease of 0.76 percent in comparison with the figure by the end of August and a decrease of 6.15 percent with that at the end of December 2010. Of these, deposits had decreased by 2.42 percent and 5.23 percent, respectively.

According to Bui Tan Tai from ACB, the volume of money withdrawn from ACB is not big, because most of the deposits have the fixed terms of 1-3 months. However, Thai said that since the deposits are mostly short terms (1-3 months), the deposits become due very quickly.

Bankers say they do not face any problems in liquidity, but they still offer high interest rates in order to maintain the market share. Prior to that, the State Bank of Vietnam removed the limit on the credit banks can provide based on the mobilized capital, which has made the usable capital of banks increase.

Meanwhile, the State Bank has decided that banks’ credit growth rate must not be higher than 20 percent. Banks still have not used up the capital they have mobilized.

Source: VnExpress

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial