The Vietnam International Bank (VIB Bank) raised interest rate for USD deposits from April 2, 2007. Accordingly, deposits with a maturity of six months, 12 months and 18 months had respective annual interest rates of 5 per cent, 5.15 per cent and 5.18 per cent, an increase from 0.05-0.4 per cent, depending on maturities. After the rise, VIB Bank is offering one of the most attractive interest rates in Vietnam.
Commercial banks raise interest ratesVIB Bank is one of many banks increasing interest rates for deposits recently. Many banks augmented interest rates on USD deposits since early March. The 2007 initiator was Vietnam Export and Import Commercial Joint Stock Bank (Eximbank). From March 12, 2007, Eximbank lifted the interest rate for USD deposits by 0.1-0.25 per cent a year. Then, Southeast Asia Bank (SeABank) also offered a rise in interest rates for VND, USD and EUR deposits.
While not joining the interest rate race, Habubank issued bearer promissory notes in USD for the second time. Bearer promissory notes purchase commenced from March 26, 2007 to May 25, 2007 or until reaching the norm of US$30 million. With the minimum value of US$100 and maximum of US$100,000, customer will benefit bullet interest rates. The interest rate for five-month notes is from 4.9-5 per cent per year while the rate from 5.1-5.2 per cent per year is applied for 11-month notes.
This interest rate rise is expected to help VIB Bank to raise capital for the entire year. VIB Bank leaders said “This interest rate adjustment is in line with the VIB Bank business requirement and the market situation.”
Preferable stock investment
There are dozens of reasons for the interest rate rise. However, the clearest reason is that banks are facing numerous difficulties in mobilising savings, as idle money is being injected into the stock market. “Deposit value is higher than the same period of 2006 but the growth rate is only half. This shows that people with savings money are investing in other fields and I think a majority is in securities,” Governor of State Bank Le Duc Thuy said.
According to Mr Thuy, this fact has two impacts on banks. First, deposits raised by banks are not enough for the economic development requirements and banks must lift interest rates. Second, enterprises can mobilise investment capital by issuing bonds, which are proven cheaper than bank loans. This way of capital mobilisation helps enterprises minimise two risks, namely interest rate risk and, more importantly, payment risks.
With a warming real estate market and an attractive stock market, more money will drain from banks. The demand for bank loans will be higher when investment projects of companies need capital. However, only commercial joint stock banks increased interest rates, not state-owned commercial banks. Hence, a really severe interest rate race will not happen in the near future.
Quynh Chi
Vietnamese
