Banks buffeted by strong winds

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Director of Vietinbank South Thang Long branch office Pham Xuan Hoe said differences between banks’ deposit and lending rates were 3-3.5 per cent and it was unreasonable when there were rumours banks had eaten up businesses’ profits through providing high lending rates.

Hoe said interest paid to customers often made up around 90 per cent of bank operation costs while the remaining 10 per cent was disbursed on office rentals and wages.

The deputy director of a big commercial joint stock bank revealed the bank hiked the deposit rate to 19 per cent per year for big depositors in the last two months.

“We have sufficient money for lending. We, however, decided on using flexible deposit rates to keep customers. Otherwise, our customers may run to smaller banks with higher mobilising rates,” said the bank executive.

“Once the deposit rates were tagged at 18-19 per cent per year, high lending rates of 22-23 per cent would be inevitable,” he added.

In his view, it would be hard for banks to lower operation costs and ease lending rates unless central bank radically dealt with the on-going rate hiking race through pumping money to ‘rescue’ low-liquid smaller banks.

Banks’ high interest rates were partly infused by the high inflation rate.

Deputy director of the Ministry of Planning and Investment’s Academy of Development and Policy Dao Van Hung assumed credit-based growth had led to high inflation in Vietnam.

Accordingly, the outstanding loan/GDP rate was 126 per cent in Vietnam in 2010, while it was around 56-60 per cent in regional countries. Therefore, inflation still remained a major threat in the next years, said Hung.

Hung, however, expected businesses to more easily access loans with reasonable lending rates in the second half of the year.

The government set full-year 16 per cent growth in total money supply and under 20 per cent growth in outstanding loans, but corresponding growth levels were 2.33 per cent and 7.05 per cent only as of June 10, 2011.

Banking experts assumed the lending rate would be eased slightly only and banks would still be cautious in lending, particularly in regard to long-term loans. 

Recently, head of the State Bank (SBV)’s Monetary Policy Department Nguyen Ngoc Bao said the SBV would consider information disclosure requirements towards credit institutions in the third quarter of the year.  The SBV would also continue checking banks’ obedience of interest rate requirements and seriously punish violators.

Bao, however, also said the SBV will further efforts to help smaller banks increase liquidity.