Forex market stable, no dollar shortage: official

Vietnam’s foreign exchange market has been stable sine March and commercial banks have a surplus of dollars, a central bank official said, rejecting dollar shortage concerns.

“All banks reported that foreign exchange demand has not increased rapidly recently,” Nguyen Quang Huy, director of the State Bank of Vietnam's foreign exchange department, said in an interview published by the Vietnam News Agency Thursday.

“Rumors about companies hoarding US dollars on forex rate concerns are groundless,” he said.

Banks now have plenty of dollar funds, Huy said, noting that they have made dollar swap deals with the central bank worth a total of around US$600 million.

All sources of forex inflows have been rising this year, including foreign investment, overseas remittances and tourism revenues, he said, citing figures from the central bank.

Overseas remittances, for instance, are expected to reach $3.6 billion after rising 30.5 percent in the first quarter, he said.

“Together with a determination in curbing the trade deficit, the increase in foreign exchange inflows will help the government improve the country’s balance of payments this year,” Huy said.

Loans rose 1.86 percent in May alone, during which period dollar loans rose 3.16 percent, according to the central bank.

As interest rates on dollar loans were lower than the rates on dong loans, many companies shifted to dollar loans, Huy said. However he said the growth of dollar loans was not too high and still “within control.”

Source: thanhniennews.com

Banks vow lower interest rates

HCM CITY — Commercial banks have committed to continue adjusting their interest rates next month to ensure that the lending interest rate will stand at 12 per cent per annum and deposit rates at 10 per cent.

The banks made the commitment at a meeting last Friday in Ha Noi with Governor Nguyen Van Giau of the State Bank of Viet Nam.

Participants in the event were five general directors of the State-run commercial banks and representatives of some major commercial joint-stock banks, namely the Asia Commercial Joint Stock Bank (ACB), the Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), the Export-Import Commercial Joint Stock Bank (Eximbank), the Viet Nam Commercial Commercial Joint Stock Bank for Industry and Trade (VietinBank), and the Military Commercial Joint Stock Bank (MB).

All the bank leaders said that interest rate cuts were needed for credit institutions to effectively use mobilised capital sources and make higher profits.

They said assistance from the Government and a consensus among the banks would help them cut interest rates in early July.

Most commercial banks in recent months have made efforts to reduce interest rates on loans.

Top priority has been given to individuals and enterprises involved in industries suggested by the Government. They include companies involved in agriculture and rural production, exporters, and small-and medium-sized enterprises.

The Joint-Stock Commercial Bank for Foreign Trade of Viet Nam and the Bank for Investment and Development of Viet Nam offered priority cases of interest rates of only 12 per cent per annum.

The 12.5-per-cent rate was applied by the Agriculture and Rural Development Bank and the Mekong Housing Development Bank. Other commercial joint stock banks have used 13 per cent per year.

Based on these results, the bank leaders agreed to a new interest rate cut plan under which major commercial banks would immediately cut interest rates of loans in Vietnamese dong to 12 or 12.5 per cent per year for priority areas.

Other commercial banks would have to try to realise this target in a short time.

In regard to deposit interest rates, bank leaders have committed to make interest cuts within three months, from the current 11.5 per cent per year to 11 per cent immediately, and to 10.2 or 10.5 per cent by late September.

Governor Giau said the central bank would continue to carry out measures, mostly monetary tools, to actively regulate market interest rates so they would fall.

He asked commercial banks not to hand out bonuses and other gifts that could increase interest rates, and to ensure a consensus among banks.

Source: saigonmoney.com

Agribank opens first branch in Cambodia

The Vietnam Bank for Agriculture and Rural Development (Agribank) opened its branch in Phnom Penh – the first of its kind in Cambodia – in a bid to tap this potential market.

We hope to provide Cambodian people with modern and convenient banking services and create better conditions for Vietnamese investors in Cambodia, said Agribank President Nguyen The Binh at the opening ceremony.

Binh said the opening of the branch demonstrated Agribank’s efforts to implement the Vietnamese government’s policy of increasing bilateral cooperation with Cambodia, especially in finance and banking.

At the event, Agribank granted US$100,000 to the Cambodian Government to support social activities.

Established in 1988, Agribank is one of Vietnam’s biggest financial institutions with a total asset capital of US$26 billion and more than 2,300 branches. It has conducted business with 1,000 banks in 96

Source: saigonmoney.com

Capital hike could mean more, not less risk: bankers

Bankers say the higher capital requirement imposed by the central bank may prove counterproductive by bringing even more risk to the banking system.

Hoang Van Toan, chairman of Dai Tin Bank (TRUSTBank), said the bank has secured approval to raise its registered capital to VND3 trillion from the current VND2 trillion.

The capital increase is to meet a new regulation that requires commercial banks to raise their capital to at least VND3 trillion (US$158.7 million) by the end of this year, which is triple the current minimum level of VND1 trillion. The central bank had said the measure is aimed at ensuring the safety of financial institutions.

However, Toan said capital increase does not necessarily mean improved safety.

The capital adequacy ratio has been standardized in accordance with international regulations to reflect the safety of a bank. So if the central bank wants to toughen safety standards, it can just raise the ratio for local banks to, for instance, 12 percent, he said.

Once a required ratio has been set, banks can either raise capital or downsize their operations. Those unable to meet the capital adequacy ratio can be forced to close or merge with other banks, Toan said.

The State Bank of Vietnam had said last month that it will raise the capital adequacy ratio for financial institutions and banks to 9 percent from 8 percent, starting on October 1. It also announced its intention to require higher capital requirements in the future. The plan is to increase the minimum capital requirement to VND5 trillion ($263.8 million) by 2012 and further double it in 2015.

But Thomas Tobin, CEO of HSBC Vietnam, said such requirements were too much and too soon.

Tobin said the Banking Work Group, which comprises 30 international financial companies operating in Vietnam, agreed that it was necessary to have minimum capital requirements to protect the market as well as the clients, but said the levels must be considered carefully.

A minimum chartered capital is required to ensure new banks are able to operate safely and grow, and large capital is also needed when the market is not stable. But after all, the capital level should match the size of each bank, he said.

Another banker who wished to remain unnamed said forcing banks to raise capital in a very short time was like upgrading small boats and making them go out to the big sea. “Will it be safer that way?” the banker asked.

The bankers warned that after commercial banks raised their capital, they may want to expand their business and take higher risks to ensure profits. This would increase the risk for the whole banking system, for instance, if small banks try to attract deposits too quickly and then struggle to find clients for loans, they said.

The general director of a bank in Ho Chi Minh City suggested banks without enough capital are given more time to improve their business. During that time their operations can be restricted to certain cities and provinces, he said.

This is a measure that can be taken before compelling small banks to merge, he said.

Source: thanhniennews.com

Insurance Market Promises Strong Growth

Although 2009 was not an easy year for any business sector, life insurers still posted very good results with growth of 14% in total premiums. Therefore, 2010, which promises to see a strong recovery of the local economy, will also be a good year for general insurance companies to widen their operations and meet their business ambitions.

In early 2009, as the global financial crisis hit the local economy, hardly any enterprises dared to set high business targets and almost all investment channels went through a dreary period. At that time, banks drastically lowered their interest rates, the real estate market froze and the stock market plunged to a bottom of 235 points, but insurers still had to ensure interest rates of about 5% to 8% per year for policyholders during the contract period.

However, general insurers still managed not only to maintain their existing operations but also to launch new products and to post good business results by the end of the year. According to the Association of Vietnamese Insurers, the life insurance industry achieved VND11.86 trillion in premium turnover, an increase of 14% from the previous year with 4.26 million general insurance policies, a 10.2% growth rate compared to 2008. Of these policies, new contracts amounted to about 758,900, up by over one-third from a year earlier.

Despite the difficult year, the number of insurance agents also increased by one-third to over 94,600 by the end of 2009. Of those, Prudential had the largest number with over 33,300, Bao Viet was next with 18,150, and Dai-ichi Life was third with nearly 11,100.

In terms of premiums, according to the Association of Vietnamese Insurers, big names continued to hold the leading positions in 2009 as Prudential led the market with VND4.73 trillion, Bao Viet ranked second with VND3.72 trillion and Manulife was next with VND1.26 trillion. Those were also the same positions in terms of premiums on new policies.

Commenting on last year’s results, Jack Howell, CEO of Prudential Vietnam Assurance, said: “We had a very good year in 2009, with a very strong increase in APE (annual premium equivalent) and total premiums, the number of policies and agents, and case size.” With strong support from Prudential Plc plus a set of strategic focuses in Vietnam, Prudential Vietnam Assurance has successfully sustained its position as the market leader in life insurance in Vietnam, he added.

Other companies also posted two-digit growth last year. Manulife Vietnam reported 25% growth in new premium value. Meanwhile, ACE Life Vietnam said it achieved growth of 60% in premiums last year.

Another foreign insurer, Dai-ichi Life Vietnam, obtained VND744 billion from insurance premiums last year, with new policies increasing by 39%. This was the second straight year the Japanese-invested company posted profits from the local market in three years of operation.

Ambitious plans for 2010

Given such successes in the local market, insurers are setting even higher targets this year. In 2010, besides expanding agent networks and improving products, insurance companies said they would continue training and developing their agents to be more professional because of the important role agents play in explaining the usage of each insurance product as well as in taking care of customers during the contract period.

Howell of Prudential Vietnam presented an ambitious plan for this year as he said the company is planning to achieve a strong double-digit growth rate by increasing the number of agents and offices and improving productivity through innovative training programs. “We will continue to be a market leader in profitable, growing product segments with a strong focus on unit-linked and protection products while protecting the margins,” he added.
The company will also deliver superior customer service by improving key service areas including premium collection, customer communication, orphan customer management and claim processing, said Howell.

The representative of ACE Life said that the company is highly aware that every good product can be imitated, but service quality and human resources cannot. ACE Life now has enough products to meet local insurance demands, so what the company has to do this year is to develop human resources and enhance service quality, the source said.

Meanwhile, for Manulife who is one of the top three life insurance companies, developing products to meet the diverse demands of people in Vietnam will be the next significant step to deepen its presence here. The firm’s market share is 10%, so it hopes to double the figure in the next five years, according to the company’s leader.

Carl Gustini, CEO of Manulife Vietnam, said: “In Vietnam, a key part of our strategy is geographic and product diversification. We want to be able to serve all Vietnamese people. We will continue to develop innovative products meeting the specific needs of all customer segments, especially mixed products offering both investment and insurance protection.”

Vietnam’s economy is predicted to be one of the fastest growing ones among ASEAN countries in the decade to come. This means there will be an emerging middle class with higher disposable incomes, so the demand for better healthcare services will increase, Gustini said. “Therefore, there will be a huge need for medical and hospital insurance. Investment and healthcare products will be our immediate focus, and pension plans and retirement product development will follow,” he revealed.

Meanwhile, Japanese-invested insurer Dai-ichi Life Vietnam wants to combine developing service quality with diversifying products to meet the target of increasing its market share in Vietnam.

Dai-ichi Mutual Life Insurance Co. acquired Bao Minh-CMG joint venture in 2007 to establish Dai-ichi Life Vietnam. It expanded its market share from 4.8% to around 7% in 2009 and plans to serve 8% of the market this year, then increase the figure to 10% in two years.

To reach these targets, Dai-ichi Life Vietnam plans to improve the human resources in its agent system and launch more products this year to meet various demands. “We hope that our agents will be pioneers in Vietnam in using netbooks with new software to provide consultancy for customers,” Dai-ichi Life Vietnam general director Takashi Fujii said.

The company is the first insurer in Vietnam to use insurance request forms with five questions instead of 31. It has also had Japanese experts design documents in the style of Japanese comic books to help customers learn about complicated financial concepts.

The pie is still big

Most insurance companies entering Vietnam say that the local insurance market has yet to develop to its potential. Therefore, besides the old names, the market in recent years has welcomed new insurers such as Korea Life Insurance (Vietnam) and Great Eastern Life (Vietnam).

The representative of Prudential Vietnam pinned high hope on economic growth as he said that Vietnam would continue to be a high-growth market. “With the entrance of more players in the market, more consumers will be able to appreciate the benefits of life insurance and learn how life insurance can help them secure their future,” CEO Jack Howell said.

Meanwhile, Gustini of Manulife said that the life insurance market was just in its infancy, as industry revenues currently make up just 2% of the country’s gross domestic product (GDP) while the share in developed countries is usually 8-15% of GDP.

“Figures from the Ministry of Finance show that about only 5% of the population has life insurance, much lower than in other developing countries, which have over 30% penetration rates. So, Vietnam represents a promising market with great potential and it is expected that the life insurance sector will continue to grow at double-digit rates in 2010,” he added.

Some new market entrants have emerged and more will come because Vietnam is seen by many as a highly attractive market and this will raise standards and benefit consumers, the CEO of Manulife said.

“The challenge though is how we can maintain healthy competition. This is an area in which the industry and the regulators will have to work closely together to ensure the healthy and proper development of the Vietnamese insurance market,” he concluded.

Source: saigonmoney.com

Deposit interest rates expected to go down in the coming months

Commercial banks are still paying high rates at 11.5 percent per annum for dong deposits, but bankers said interest rates will go down in several months.

Viet A Bank, which once raised the deposit interest rate to a very high level, at 11.8 percent per annum, has lowered the interest rate after the State Bank of Vietnam threatened to inspect banks peddling overly high interest rates. The bank is now offering an interest rate of 11.5 percent for many kinds of deposits, a level Viet A and many other banks have committed to implementing.

Vietinbank is now offering the same interest rate of 11.5 percent for 1-36 month deposits.

With the exception of some commercial banks still offering high deposit interest rates of 11.5 percent, many banks are quoting deposit interest rates at levels lower than 11.5 percent, including Dai Tin, An Binh Bank, VP Bank and ACB.

The director of a joint stock bank in the north said that recently, many banks have tried to borrow capital on the interbank market. However, the State Bank then requested these banks reduce the volume of capital they had borrowed from the interbank market. Therefore, these banks had to offer high deposit interest rates in order to attract more capital to offset borrowings on the interbank market

However, the director said the State Bank has announced it will give support to these banks, which means there is high hope that the deposit interest rate will go down in several months.

Nguyen Hung, General Director of VP Bank, said that two months ago, depositors and banks regularly negotiated about deposit interest rates. In many cases, as banks seriously lacked capital, they had to pay the interest rates demanded by big depositors. However, this trend has largely disappeared.

Moreover, interest rates on the interbank market have been decreasing, making it easier to borrow capital through the open market operation (OMO). Therefore, according to Hung, there is reason to believe deposit interest rates will decrease in the near future.

The government bond interest rate has been lowered to 10-10.5 percent, serving as the benchmark for the rest of the market. Some commercial banks joined the latest Government bond bidding June 17. The Treasury only put forth a bid of 1000 billion dong worth of three-year bonds and 1000 billion dong worth of five year bonds, while commercial banks registered to buy 6720 billion dong worth of three-year bonds and 3600 billion dong worth of five year bonds. All the Government bonds put forth for bidding June 17 were sold at an interest rate of 10.6 percent for three-year bonds and 10.95 percent for five-year bonds.

This, according to experts, showed that banks’ capital is now profuse and they have money to purchase bonds. Therefore, experts say, there is reason to believe deposit interest rates will go down in the time to come.

Source: saigonmoney.com

Nam A Bank finishes core banking project

HCMC – Nam A Commercial Bank has just finished deployment of the core banking project that will enable the bank to launch new products and services in coming time.

Nam A Bank has cooperated with partners such as Oracle, HP, FPT, and Ocean Technology to carry out the project since March last year. Total investment capital of the project is US$4.5 million, said the company at a function on Tuesday to announce the completion of the project.

With the new technology, the IT system at the bank’s headquarters is directly connected with systems of its branches and transaction offices so the bank can offer diversified services to customers such as payment, money transfer, Internet Banking, Mobile Banking, and ATM system.

Given the core banking system, Nam A Bank expects to issue ATM cards nationwide in the third quarter this year in connection with big card systems such as Banknetvn, VNBC, and Smartlink.

The bank has got approval from the State Bank of Vietnam to increase its capital from VND1.25 trillion to VND2 trillion and has submitted the plan to further spur its capital to VND3 trillion within this year as required.

Source: saigonmoney.com