As of September 30, the total assets of the system had fallen by 1.89% compared to end-2011. In particular, the total assets of joint stock commercial banks; joint venture and foreign banks; and financial and finance leasing companies had dropped 7%, 4.56% and 6% respectively.

The deterioration in the banking system is reflected in several indicators.

First, the capital adequacy ratio (CAR) stood at 14.11% at the end of September, versus 14.55% on April 30, when SBV published data on the banking system for the first time. CAR is a gauge of a bank’s capital safety, which must be kept at 8% as regulated in Vietnam.

Second, the ratio of short-term capital used as long-term loans had risen to 16.81%, while it was only 7.58% on April 30.

Third, the credit-to-deposit ratio had reached 90.9%, down slightly from 94.7% in late April.

Some positive changes can be seen, however, such as equity capital of the system having amounted to VND413.4 trillion, up 5.76% against end-2011.

Return on equity (ROE) had improved a lot compared to the preceding month, standing at 4.14%. However, ROE of financial and finance leasing companies had declined 1.21% against the end of 2011.

Besides, chartered capital of State-run banks had picked up 27.8% over end-2011, while joint stock banks had recorded an increase of 5.24%.

An expert said the data revealed by SBV pointed to insignificant improvements in the banking system over the past four months.

Meanwhile, another statement from the central bank shows that as of July 30, 2012, money supply, including valuable papers issued to other credit institutions in the country, had increased 6.81% against last year’s end.

A rise in money supply proves that liquidity is plentiful, putting pressure on inflation.

Outstanding balance, including outstanding loans, investment in corporate bonds and off-balance sheet trust loans stood at VND2,880 trillion at the end of July, an increase of 1.24% against late 2011.

Recently, SBV announced that as of October 19, the credit growth of the banking system had reached 2.77%, much lower than expected, although some large banks had achieved high growth rates by the end of the third quarter, like Vietcombank with a rate of 8.6%, Military Bank 10%, Ban Viet 20%, PGBank 7.9% and Sacombank 8.3%.

By Hong Phuc - The Saigon Times Daily - November 11, 2012

Banks suddenly slash deposit interest rates

A number of Vietnamese banks have made recent and sudden cuts to deposit interest rates.

A survey of Hanoi's banking sector has shown that banks have reduced deposit interest rates by 0.3% - 0.8%. Techcombank’s highest current deposit interest rate is just 12% per year, instead of 12.5% previously. Eximbank has applied the highest rates, of 12% per year for 12-month and 13-month terms, a change from the old rates of 12.3 – 12.8%.

Vietcombank applies the deposit interest rate for terms of over 12 months at 10% per year. Agribank’s annual rate is 12% for 24-month term and 11% for 12 and 18-month terms.

At smaller banking groups deposit interest rates have been also slashed remarkably. Previously banks were finding ways around regulations concerning interest rate levels by offering other benefits, but that situation has seemed to change.

Currently, the deposit interest rate for 12 and 13-month terms at LienVietPostBank is 11% per year, and 11.5% for 24-months. Deposits with terms of more than three years are given interest rates of 12% per year. VIB’s highest long-term deposit interest rate is just 11% annually.

Experts said the banks’ trend of lowering deposit interest rates is reasonable because they have gained better capital ratios.

However, the same experts added that, slashing the deposit interest rate is likely just a temporary shift. A deposit 'interest rate race' is forecast to take place early next year as banks ramp up promotions for Tet.

In mid-September, a range of big banks, including ACB, Eximbank and Sacombank, imposed high VND deposit interest rates with 13% by ACB and Sacombank and 12.8% by Eximbank.

By Nguyen Hien - Dantri International - November 11, 2012