Vietnam Daily News

Overview on banking operations in week between December 5 and 10

Written by Dailynews.vn Tuesday, 13 December 2011 16:46

Three banks to be merged, forming a new bank with chartered capital of nearly 10.6 trillion dong, global rating firm Standard & Poor's (S&P)'s downgrade on long-term credit rating of three Vietnamese banks namely Bank for Investment and Development of Vietnam (BIDV), Vietnam Commercial Joint Stock Bank for Foreign Trade (Vietcombank) and Vietnam Technological and Commercial JS Bank (Techcombank) from BB- to B+ were the highlights in the week between December 5 and 10.

During past time, three to-be merged banks namely De Nhat (First) Commercial Joint Stock Bank (Ficombank), Vietnam Tin Nghia Commercial Joint Stock Bank (TinNghiaBank) and Saigon Commercial Joint Stock Bank (SCB) sometimes fell into the insolvency situation.

The State Bank of Vietnam (SBV) refinanced these three banks. But, in efforts to resolve this problem completely, on December 6, the central bank approved in principle the merger of these three banks with the support of BIDV.

According to the merger plan, the "new" bank will still retain the name of Saigon Commercial Joint Stock Bank (SCB) with a combined chartered capital from three banks of nearly 10.584 trillion dong and total assets of 153.626 trillion dong. Thus, this will be the fifth largest commercial joint stock bank in terms of chartered capital in the current banking system.

BIDV will represent the state capital in the merged bank to ensure the safe operations of the merged bank and the interests of depositors.

According to BIDV's chair, Tran Bac Ha, the bank has granted 2.4 trillion dong to support the liquidity and sent 22 key officials to survey and review comprehensively the operation of three banks. As planned, this process will end on December 25, 2011.

After these three banks announced to merge for about three days, Ha said that, on December 8, the total new deposits of customers in three banks increased from December 7 by over 50 percent. The total amount of money withdrawal was higher than the total deposits by only 400 billion dong, lower than the difference of 900 billion dong of deposits and withdrawal on December 5.

Thus, three of eight ailing banks (the figure was given by the central bank's governor Nguyen Van Binh on November 24) will be merged. In the near future, it is expected that there will be at least additional two merger deals (according to the local newspaper Saigon Dau Tu Tai Chinh). Of which, two small banks headquartered in HCM City are planning to voluntarily merge with one northern-based bank and two northern-based small banks also plan to merge together under the support of large bank.

The Vietnamese prime minister on December 6, 2011 signed Directive No. 2196/CT-TTG issuing a number of measures to strengthen management for real estate market whereby the central bank will continue to direct commercial banks and credit institutions to strictly carry out the government's Resolution No. 11 to guarantee reasonable and safe credit growth and proportion for real estate sector. In the short term, the central bank will reduce the credit growth and proportion for real estate sector with reasonable route to avoid shocks, at the same time apply measures to increase the liquidity and avoid the freeze of the real estate market.

International rating firm Standard & Poor's (S&P) on December 8 downgraded the long-term credit rating of three Vietnamese banks namely BIDV, Vietcombank and Techcombank.

Accordingly, the credit rating of Techcombank was lowered from BB- to B+ with stable outlook, Vietcombank and BIDV from BB- to B+ with negative outlook. The short-run credit rating of these banks still remained at B.

According to the new rating method of S&P, the operational environment assessment results will decide the basic classification of banks in the country. Due to Vietnam's credit rating had been lowered from 9 to 10, the basic rating of all Vietnamese banks also was adjusted.

Responding to S&P's credit rating downgrade, BIDV and Techcombank said that this downgrade was due to changes in evaluating method of S&P but not the financial capacity of these banks. Vietcombank does not have official response. Vietnam has only three commercial banks hiring S&P to make credit ratings.

S&P's downgrade on credit rating of BIDV has taken place about 20 days before BIDV's IPO (initial public offering) of 85 million shares. However, BIDV said that the bank still receives high appreciation from local and foreign institutions and economic experts.

Earlier, Fitch Ratings also positively assessed for BIDV after BIDV was selected by the government and the central bank to support the merger of three commercial joint stock banks in Vietnam.

Highlights on financial-banking operations in week:

From December 5 to 9, the central bank marked a net injection of five trillion dong in open market operations (OMO) after a net withdrawal of over 2.3 trillion dong in the previous week. The interbank interest rate for less than 1-month term slipped slightly by the weekend to stand at 13-13.9 percent per annum.

The State Treasury continued to succeed in raising 100 percent government bonds (500 billion dong) at the coupon rate of only 12.1 percent per annum, lower than the interest rate in the secondary market by 0.5 percent.

According to experts, the central bank's reduction of the interest rate cap would create bad consequences for the banking system because the slowdown of inflation is still not very clear, while many banks are facing liquidity problems.

The country's overall balance in 2011 is forecasted to enjoy a surplus of $3.1 billion, a big improvement against the deficit of $8.8 billion in 2009 and $3.07 billion in 2010.

The total amount of inward remittance sent to Vietnam in 2011 is estimated to reach $9 billion. This is one of the major supports to help the central bank carry out its commitment of adjusting the forex rate at less than 1 percent.

The lending interest rate of gold mortgage at Maritime Bank decreased to 4.28 percent per month (51.36 percent per annum) from 4.5 percent per month (54 percent per annum) previously.

Source: www.intellasia.net/news/articles/finance/111350568.shtml