Foreign, domestic banks go fishing – for capital

Wednesday, May 14, 2008
Lacking capital, bankers are trying different ways to lure capital. While foreign banks are raising deposit interest rates, domestic banks are launching promotion programmes with attractive preferences.

On May 12, ANZ Bank announced it will apply the new interest rate of 12% per annum on 1-6-month term deposits, which is 0.5% higher than the rates offered by domestic banks. The new rate will be applied for deposits of VND20mil at least.

Meanwhile, the ceiling interest rates applied by domestic banks are 12% for six-month term and longer deposits and 11.5% for less than 6-month term deposits. A securities investor revealed that a foreign bank offered him the interest rate of 14% per annum if he deposited VND4bil or more.

When asked why foreign banks have the right to apply interest rates higher than the ceiling interest rate and the rates applied by domestic banks, Ho Huu Hanh, Director of the HCM City branch of the State Bank of Vietnam, said that foreign bank branches are under the control of the central bank, and the branch cannot interfere in this.

Meanwhile, domestic banks, in order to attract more capital, have been rushing to launch a series of promotion programmes.

VP bank, for example, is running the promotion programme “VP Bank’s golden gifts” from May 15 to August 9 with the total value of gifts up to VND3bil. This is the most expensive promotion programme the bank has initiated so far.

Ocean Bank has launched a programme allowing depositors to make deposits in VND with the value ensured by gold. In all cases, the value of the deposits would not be lower than the initial value. Eximbank is also running a summer promotion programme which will last until August 2 with the total value of VND1bil.

In order to mobilise capital from all possible sources, Saigon Joint Stock Bank has raised demand deposit interest rates from 3.6% per annum (0.3%/month) to 9% per annum (0.75% per month).

In principle, demand deposits always have low interest rates, not higher than 30% of fixed term deposit interest rates. However, as banks need capital, they have raised demand deposit interest rates to 3.5-4%. With the new interest rate, SCB’s demand deposit interest rate is equal to 70% of its fixed term deposit interest rate.

Bankers say that the increases of demand deposit interest rates will not cause new interest rate wars as only individuals and businesses that usually pay through banks make demand deposits. (SGTT, TBKTVN)