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Eight circumstances keeping cash away from banks

Since mid February, mobilised capital growth has been slowing down though commercial banks have offered high interest rates and launched big promotion programmes. Why?

Statistics show that by the end of the first quarter of 2008, the total mobilised capital of the whole banking system had increased by 5.48%, and total outstanding loans had increased by 10.8% over the end of 2007. The figures were 11.76% and 6.4% at the same period of last year.

At the Saigon Joint Stock Bank (SCB), the total mobilised capital saw a decrease of VND300bil in the last two weeks of March, and a further decrease of VND450bil in the first two weeks of April.

State owned banks, which have the biggest advantages in capital mobilisation thanks to their wide operation networks, prestige, are also facing the same situation.

In Hanoi, the total capital mobilised by state owned banks by early April had decreased by nearly 4% compared to December 31, 2007.

The Vietnam Bank for Agriculture and Rural Development (Agribank) and Vietnam Bank for Foreign Trade (Vietcombank), which always lead in capital mobilisation, have reported the decreases of 13% and 6%, respectively, in mobilised capital.

State owned banks, which were once the biggest lenders on the interbank market, now have become borrowers. By the end of March 2008, state owned banks in Hanoi had borrowed 55% more money through the interbank market over the end of February.

In HCM City, by April 16, 2008, the banks’ mobilised capital had dropped by VND9,225bil over the end of March, of which the deposits of state owned banks had decreased by 1.74%, and of joint stock banks, by 0.28%.

Eight reasons have been cited to explain the problems.

First, the tightened monetary policies have been making it difficult for businesses to access bank loans. As a result, many businesses which have deposits at banks have drawn money out to lend to other businesses to get higher interest rates. People who have idle capital are not making deposits at banks anymore, but lending to their relatives and friends to serve those people’s investment projects.

Second, banks may face a capital shortage as the State Treasury is planning to withdraw VND52,000bil worth of government money from state owned banks.

Third, many institutions that are founding shareholders of other institutions to be organised have drawn money from banks to transfer to accounts to prove their financial capability.

Fourth, as the stock market keeps falling, OTC share prices are descending, which has made a lot of investors incur losses. Therefore, they have no money left to deposit at banks. Moreover, the deposits of securities companies at banks have been decreasing due to 1/ the losses incurred by the companies and 2/ lower balances in investors’ accounts at securities companies.

Fifth, as the gold price keeps increasing and the CPI remains high, people tend to inject money in gold instead of bank deposits. It is estimated that some 40 tonnes of gold have been imported to Vietnam so far this year, worth $1.2bil. 60% has been sold on the market.

Sixth, as the real estate market has cooled down, investors cannot sell properties to take back capital; therefore, they do not have money to make bank deposits.

Seventh, people, hearing about the car import tax increase, have drawn money from banks to buy cars before the tax increase decisions become effective.

Eighth, the idle money among the public is nearly exhausted. People deposited at banks when the interest rates were high, at 13% per annum, and now they do not have more money to deposit.

(Source: TBKTVN)

 

Vietcombank is thought to be at a disadvantage in negotiating with foreign investors to choose strategic partners, especially in relation to share prices.

One of the most important topics to be raised at the shareholders’ meeting of Vietcombank, slated for April 26, will be the selection of foreign partners.
In fact, there is one special thing in Vietcombank’s equitisation process: the government decided to make IPO first and then look for strategic partners. The change ‘at the last minute’ originated from difficulties in negotiating about stake sale prices with candidates.
As Deputy Prime Minister Nguyen Sinh Hung instructed, the stake prices for strategic partners must not be lower than the average IPO price. And the instruction has been putting big difficulties on Vietcombank.
Vietcombank’s shares are selling at VND53-55,000/share only on the OTC market, much lower than the average IPO price at VND107,572/share, and even lower than the preferential price level at which stakes were sold to Vietcombank’s staffs.
A question has been raised for Nguyen Hoa Binh, Chairman of Vietcombank: if the low price of Vietcombank’s shares on the market puts Vietcombank at a disadvantage when negotiating with candidates, could candidates take advantage of this to force the price down?
Binh said that Vietcombank has anticipated this, but declined to give an answer, reasoning that the issue was not listed among the issues he was authorised to provide information about.

However, Binh said that the low price of Vietcombank’s shares on the OTC market would be an advantage to the sellers. He said that share price decreases are undeniable, and that the price is decided by the market’s supply and demand.
Binh declined to give information about the prices candidates offered.
Besides sale prices, the time to sell stakes is also a problem for Vietcombank, indirectly creating advantages for candidates. It is clear that in the first shareholders’ meeting, Vietcombank will still not have foreign strategic partners, and it is highly possible that it will not have them when it lists on the bourse.
The prolonged process of selecting foreign strategic partners will affect shareholders’ thoughts, as shareholders want to inject money in a company where everything is ready. Therefore, the presence of strategic partners at the listing moment has significance.
However, Binh said that Vietcombank will settle the problems step by step, with the priority to be given to urgent matters.
Binh said that Vietcombank will not get strategic partners at any cost. He said that the selection of strategic partners must serve the benefit of Vietcombank’s shareholders and the country, while the bank will not aim to seek short-term financial sources.
No exact date has been set about when Vietcombank must finish selecting strategic partners; therefore, the time to sell stakes is not an issue at the negotiating table. However, Binh has revealed that the bank wants to complete the work in 2008.

In fact, many foreign investors have expressed interest in buying Vietcombank stakes. Besides the negotiations with existing candidates, Vietcombank is also working with new names.
Binh has confirmed that despite the difficulties, Vietcombank will not ease the requirements on strategic partners.

(Source: TBKTVN)

IOC pleased with London progress

The International Olympic Committee's monitoring team has heaped praise on the progress London is making for the 2012 Games.

The team, who completed a three-day visit to the capital on Thursday, awarded near-perfect marks to London.

IOC co-ordination commission chairman Denis Oswald said he'd give London '9.75 out of 10.'

Oswald added: "From what we have seen, we are very confident we will have excellent facilities for the Games."

London 2012 organisers marked the end of the visit by announcing construction has officially started on the Olympic Stadium, three months ahead of schedule.

Funding has been one area of concern for the 2012 Games as has the fact that work on the Olympic Village is due to start next month without a contract with the constructors.

But Oswald says that there are no areas that the IOC should be massively concerned with.

"I have difficulty in finding any area where we have concerns but if we had to mention something which will be challenging it is traffic and transport," he said.

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"There will be additional people coming in to watch the Games and going from one place to another will be a challenge but we know LOCOG (the London Organising Committee of the Olympic Games) has made plans already and with the quality of people on board we are confident this will be resolved in a satisfactory manner."

The IOC visited venues including Wembley Stadium on Tuesday and went on to meet the main London 2012 project leaders.

These include London 2012 chairman Lord Sebastian Coe, Olympics minister Tessa Jowell, British Olympic Association chairman Colin Moynihan and ODA chairman John Armitt.

The Commission was also able to meet this week with British Prime Minister Gordon Brown, leader of the opposition David Cameron, Liberal Democrat MP Don Foster, Olympic Minister Tessa Jowell and the newly elected Mayor of London, Boris Johnson.

"The cross party support for the Games and the backing from the highest levels of Government in Great Britain is extremely reassuring," said Oswald

"This strong basis of support for the Olympic and Paralympic Games will be crucial to London 2012 achieving its objectives."

We take great encouragement from the Commission's comments
Lord Sebestian Coe

Jowell herself welcomed the IOC report of London's progress.

"I am delighted that the IOC co-ordination commission has recognised the strong progress we have made in our preparations for the 2012 Games," she said.

"The fact that we marked the start of work early on the stadium is a tremendous achievement and is a real indication of our progress.

"We will continue to work tirelessly to ensure that London hosts Olympic and Paralympic Games we can all be proud of."

Lord Coe added: "We take great encouragement from the Commission's comments and the obvious confidence they have in the job we have done so far - they, after all, are the experts."

 

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