Banks look to end 2010 with a bang

Techcombank put the cat among the pigeons last week

Local banks have revealed an ambitious target to raise deposit rates and assets to round off 2010 in style.

Techcombank was stopped, by the State Bank, conducting its three gold promotion days during December 8-10 to put deposit interest rates at 18 per cent, per year for any deposit more than VND100 million ($5,200) during the month.

Twelve banks in Hanoi committed to apply deposit interest rates of 14 per cent, per year from this week. Its peers in Ho Chi Minh City will also make similar commitments this week.

The race was kick-started two weeks ago when some banks offered deposit interest rates of 16 per cent, per year from the common level of 14 per cent. Banks joining the race included Techcombank, SeAbank, VietA Bank and Western Bank.

Ho Huu Hanh, director of the State Bank branch in Ho Chi Minh City, said offering a deposit interest rate of 17-18 per cent, per year was abnormal and not reasonable given the common level of 14 per cent, per year.

“Local banks started offering negotiated interest rates with each customer and this will make it hard to identify which banks are offering rates over 14 per cent, per year,” said Hanh.

An ACB source said the banks that participated in the race were following their ambitious target to make their full-year performance reports look good.

“Along with the aim to balance short and long-term deposit sheet, most banks are trying to meet their deposit growth rate and total asset targets,” said the ACB source.

The central bank branch in Ho Chi Minh City report read that the year-on-year deposit growth rate was 26.9 per cent by the end of November this year, an increase of only 1.7 per cent against the figure in October. Of which, Vietnamese dong deposits posted a year-on-year growth of 25.5 per cent, lower than 31.2 per cent US dollar deposit growth rate in the same time. 

The deposit growth rate this year reportedly falls behind the credit growth rate, with Ho Chi Minh City having a year-on-year credit growth rate of 32.9 per cent by the end of November, higher than the whole country’s set target  of 25 per cent for this year. Ho Chi Minh City-based joint stock banks’ deposits account for 56 per cent of the total, a year-on-year increase of 41.7 per cent by November. 

The hike in deposit interest rate will lead to credit interest rate increases which are around 20 per cent per year, considered too high for enterprises to fuel their businesses.

“To cope with such high credit interest rates, companies like us must change their business scale and focus on running business in profitable segment that can cover credit interest rate,” said a CMC Distribution Company official.