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What’s behind the 2.8 million of billions dong worth of capital?   2012-02-13 - TBKTVN

According to the State Bank of Vietnam, by the end of October 2011, the total capital mobilized by credit institutions had reached 2.8 million of billions of dong. A lot of banks, including the leading ones on the market, reportedly could not fulfill the capital mobilization plan.

The key weapon of banks

Since early February, the Military Bank has been running its biggest ever promotion campaign worth eight billion dong.

Such big promotion campaigns have also been launched by many other banks since late 2011. VP Bank has launched two preferential packages worth 9 billion dong for each. Viet A Bank ran a program worth 15 billion dong. SCB, which has been merged from three banks, has also launched a big program worth 32 billion dong.

It seems that promotion campaigns with preferences offered to clients are the key tool used by banks to attract more capital to the banks.

In previous years, big promotion campaigns were run only by the big banks. The Bank for Investment and Development of Vietnam BIDV, for example, once ran the programs worth 30-33 billion dong. However, the market has witnessed the competition from joint stock banks recently.

Analysts have commented that promotions now serve as the key weapon for banks in mobilizing capital now, when the banks cannot compete in terms of interest rates. The State Bank of Vietnam has decided that banks must not pay more than 14 percent per annum for dong deposits.

Both deposits and lending in dribs and drabs

According to the State Bank of Vietnam, by the end of October 2011, the total capital mobilized by credit institutions had reached 2.8 million of billions of dong.

In previous years, the majority of the cake belonged to state owned banks which have large networks and advantages in capital. However, some changes have been made with the growing up of joint stock banks.

By the end of 2007, state owned banks had held 59.5 percent of the market share. The group of banks only included six members, including Agribank, BIDV, Vietcombank, ,Vietinbank, MHB and the Bank for Social Purposes. The remaining market share was held by joint stock banks, foreign banks and other credit institutions.

Since 2008, the structure of the market cake has changed a lot with the “encroachment” of the joint stock banks. By the end of 2008, the capital mobilization market share held by state owned banks had reduced to 57.1 percent, while the market share of joint stock banks rose to 33.1 percent. By the end of 2009, the figures had turned to 49.7 and 40.8 percent.

In the latest report, by October 2011, joint stock banks had held the biggest market share of 45.2 percent, while state owned banks only had 43.8 percent, and foreign banks 7.5 percent.

Not only facing difficulties in mobilizing capital, banks are also facing the challenge in balancing the mobilized capital and loans.

An investment institution has recently released a report showing that by the end of 2011, the credit of the whole banking system had reached 2.524 million of billions of dong, while the mobilized capital was 2.514 million of billions of dong. This means that the lending has exceeded the mobilized capital.

A supervision agency’s report has also pointed out that since the day the limit of the ratio of deposits on mobilize capital stipulated in the Circular 13 was removed, the market has witnessed the worrying increases in lending.

The limits were 80-85 percent in Circular 13 (banks can lend 80 or 85 percent of the mobilized capital). Meanwhile, the ratios have reached 90 or 100 percent at many banks.

The narrower gap between the mobilized capital and lending has also been explained by the fact that since 2005, except 2010, the credit growth rate of the banking system has always been higher than the capital mobilization growth rate.

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