With cap on deposit interest rates and
controlled credit growth quota, commercial banks now are gearing up to boost
profits from non-credit segments like interbank market and gold trading.
Since
after Lunar New Year (Tet) so far, the liquidity of the entire banking system
has been partially stabilized, the tension on the interbank market has been
eased and many commercial banks have showed signals of capital excess, so the
State Bank of Vietnam (SBV)’s decision to lower the deposit rate cap from 14%
per year to 13% is appropriate.
However,
according to many banking experts, this policy provides an opportunity for
interbank operations of large commercial banks. Evidence for this is the recent
sudden rise of the interbank interest rate after being kept stable for a long
time. Particularly, on March 13, the interbank average interest rate for
6-month term skyrocketed to 21% per annum (p.a.), up 7.59% from March 9.
This is
the highest level of the interbank interest rate for this term during the past
22 months. The interbank overnight interest rate also surged 0.17% whereby
commercial banks en masse offered short term capital mobilization policies of
from non-term to 1-day term and progressive interest rate policy to attract the
short term capital flows.
Explaining
the move, deputy general manager of a joint stock bank said that besides
lowering interest rate cap and pumping liquidity to buy US dollar, last week,
the central bank withdrew capital through issuing treasury bills with terms of
28, 91 and 182 days to regulate capital flows.
Earlier,
the governor Nguyen Van Binh said the central bank would issue T-bills with
terms of 1, 3 and 6 months and in necessary case, the central bank is ready to
issue T-bills with term of 364 days at a reasonable interest rate to maintain
the interest rate stability in the market at the same time attract temporary
surplus funds of commercial banks.
Unlike
the issuance of 20.3 trillion dong worth of compulsory T-bills in March 2008 to
draw down money in circulation to combat surging inflation, this time the
central bank only issued T-bills with many interest rates and different terms.
This
means that commercial banks with capital abundance can temporary buy T-bills
with appropriate term for their capital sources. However, according to
commercial banks, even if issuing bonds does not significantly impact the
liquidity of the commercial banking system, it has certain influences on
inter-bank interest rates.
Especially
for small banks, weak capital, under the pressures of deposit rate ceiling, the
liquidity may fall when the deposit interest rate cap is reduced to 13% / year,
then the interbank interest rates may be pushed up higher by large banks.
A
commercial joint stock bank’s leader said that the limited credit growth will
force large commercial bank to target the interbank business segment to earn
profit, especially commercial banks with big chartered capital. But unlike last
year, this year, commercial bank will be more cautious as they have learnt from
experience of interbank bad debts in 2011. Therefore, indispensably for small
banks, interbank creditors will still maintain the mechanism of mortgage assets
such as foreign currencies and gold to ensure for their safety and help banks
resolve liquidity when necessary.
Gold
trading services still remain potential. Recently, the gold deposit rate in
many commercial banks tended to increase to hit 4.5% p.a. to attract gold from
people as a tool to help banks’ liquidity when needed.
Although
at this time, commercial banks are not allowed to lend gold, some banks that
are allowed to engage in trading gold on international accounts may earn a
large profit from this activity. However, according to Tran Phuong Binh,
general director of Dong A (Eastern Asia) Commercial JS Bank (DongABank-EAB),
in comparison with the gold business segment, earning profit from payment
services will have advantages and be more focused by banks.
Because
the profit from this segment is more stable and less risky than the business
segment of gold and foreign currencies, especially for banks that have a large
number of individual customers will have many opportunities to increase their
revenues from payment services.
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