Domestic banking industry are forecast to face many challenges in 2009, according to independent market watchdogs who also urge local banks to improve themselves in all aspects to survive, the Vietnam News Agency-Vietnam News reported.
The watchdogs said that in 2009 domestic banks would have to adapt to adjustments in monetary policies made by the country’s central bank in order to increase domestic enterprises’ production and trading, and prevent an economic recession.
Domestic banks are also predicted to obtain low-to-modest growth rates from loans and deposits since the central bank has planned to more strictly control the quality of credit-related activities.
Additionally, interest rates of both loans and deposits will be further cut as required by the prime minister, which would make domestic commercial banks’ capital mobilization more difficult.
This is because lower deposit interest rates become less attractive compared to other investment opportunities, such as the stock market, gold trading floors, and the foreign currency market.
The number of bad debts by domestic banks may be higher in 2009 than last year. This is due, in part, to the fact that the domestic real estate market has not shown any signs of recovery. Additionally, enterprises involved in other industries will continue to face financial difficulties due to market sluggishness.
Furthermore, in 2009, fully foreign-invested banks will become further involved in the market, making the competition fiercer.
To survive, experts said domestic banks should expand their own networks, improve technology and increase the value of their services.
They also stressed the need for banks to have contingency plans in place to cope with fluctuations in the monetary market.
Any bank that focused on measures to minimize bad debts in 2008 would meet fewer difficulties in 2009, experts concluded.
Last year, no domestic bank recorded a loss despite having to face the strong fluctuations that took place in the market. At the same time, however, growth rates were very modest.
The State Bank of Vietnam (SBV) said that in 2008 the entire banking industry’s outstanding credit increased by 21 per cent-22 per cent against the previous year. The rate was considered to be much lower than the permissible credit level ceiling of 30 per cent.
Meanwhile, costs that domestic banks pay for mobilizing capital increased by 20 per cent to 21 per cent.
However, the banks made a considerable profit from foreign exchange-related activities. In particular, the inter-banking average rate was up 5.4 per cent compared with late 2007, while transaction rates of commercial banks increased by 8 per cent to 9 per cent.
In 2008, the bond market also benefited the domestic banking sector. Many banks made large profits from bonds since they bought the bonds at very cheap prices in May. (VNS)
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