Local banks poised to follow Fed lead

The increases come in the wake of three consecutive interest rate increases by the US Federal Reserve.
Vietcombank, one of the biggest players in the country’s banking system, decided to add from 30 to 60 percentage points to its mobilisation rates for the US dollars on all terms.
The rates for dollar deposits are now 1.55, 1.65, 1.8, 2 and 2.4 per cent per year for terms of one, three, six, nine and 12 months, respectively. The call deposit rate remains unchanged at 1 per cent per annum.
The new rates are valid only at Vietcombank’s branches and transactions in Ho Chi Minh City, where the bank expected higher mobilisation volumes for the greenback than in Hanoi.
Vietcombank’s decision came just one day after the Fed announced it would raise prime interest rates for the dollar from 1.5 to 1.75 per cent per year, the third consecutive increase since last July.
Flatly denying the increase was a move to catch up with the latest Fed increase, the director of Vietcombank’s capital department Hoang Hong Hanh said the new rates were part of the bank’s long-term dollar mobilisation strategy.
Hanh, who confirmed to Vietnam Investment Review just two weeks ago that her bank did not plan to raise its interest rates, added that her bank had forecast last week’s move by the Fed and it was therefore, not the only reason for her bank’s rate change.
The director of Vietcombank’s Ho Chi Minh City branch, Nguyen Phuoc Thanh, said the higher interest rates announced by the Fed pushed the six-month Singapore Interbank Offered Rate (Sibor) to more than 2 per cent from the earlier 1.8 per cent.
The soaring Sibor enabled Vietcombank to gain a larger margin for its overseas deposits and as such, it gave the bank good reason to think about attracting more dollars from the domestic market.
Following Vietcombank’s move, the bank with the biggest foreign currency reserve in the country, other commercial banks said they remained on standby in regard to a rate increase.
A representative of the state-owned Industrial and Commercial Bank of Vietnam (Incombank) said the bank would look at its own foreign currency reserve and follow its mobilisation situation closely to decide whether or not to hike dollar deposit rates before the end of the year.
Incombank’s interest rates for dollar deposits are much lower than those from Vietcombank with rates for one, three, six, nine and 12 months staying at 1.00, 1.20, 1.35, 1.60 and 1.90 per cent per year, respectively.
Meanwhile, director of the biggest joint-stock bank, Asia Commercial Bank (ACB) Pham Van Thiet was quoted by a local newspaper last week as saying that ACB had enough dollars in reserve to meet the demand for dollar loans and there was no need for the bank to raise interest rates.
Nevertheless, what has just happened at Vietcombank proves that a steady confirmation by a bank does not necessarily mean a bank will keep its word, especially when market fluctuations force it to think likewise.