Loan/deposit ratio has exceeded 100% at many banks

For more than a decade, the Vietnamese banking system has applied the prudential ratio in comparing the level of loans compared to capital sources, contributing to the prevention of liquidity risks and operational safety.

This ratio has been adjusted through different periods, both in terms of the level and content of the regulation. There were also periods of debate about recording deposits of the State Treasury to calculate or exclude…

There was a period when statistical data from the State Bank of Vietnam mostly showed a high reference rate, but different from the regulation. The reason is that there are statistics on the “ratio of credit extension to mobilized capital”, while the regulation is “the ratio of outstanding loans to total deposits”, the content and calculation of these two ratios is different.

However, although the content and calculation are different, both ratios above reflect the level of lending and capital use of commercial banks.

And there is one more data that can also be considered for more reference about that level of lending through the loan/deposit ratio according to the financial statements of commercial banks. It should also be noted that this ratio has a different meaning and calculation from the loan-to-deposit ratio (LDR) limit prescribed by the State Bank.

Loan/deposit ratio up to 145%

A survey of data from 27 banks’ consolidated financial statements for the third quarter of 2022 shows that the average customer loan/customer deposit ratio of the group is now at 105.3%, a sharp increase compared to that of the group. with a figure of 97.9% at the end of 2021.

In which, up to 16 members have a loan/deposit ratio exceeding or equal to 100%, which means that the bank is lending more than the customer’s deposit.

VPBank is currently the bank with the highest loan/deposit ratio in the survey group, up to 145.1%, which means the bank is lending out VND 145.1 while deposits from customers are VND 100. . However, this is also typical of the difference with the above LDR regulation, because VPBank has just suddenly increased its charter capital, has a huge capital surplus from the previous year’s capital sale, international capital, or the market. In case there is a loan entrustment source and the trustee accepts the risk, the LDR calculation is excluded…

Similarly, SeABank also owns this ratio is quite high with 132.3%, at Techcombank is 128.7%, at VIB is 119.6%, HDBank is 118.6%, etc.

The survey also showed that up to 23/27 members had an increase in customer loan/deposit ratio in the past 9 months. Kienlongbank (up 22.6 points), MBB (up 18.5 points), Techcombank (up 18.4 points), SeABank (up 16.1 points),… This ratio is the largest in the past 3 quarters.

Meanwhile, in the opposite direction, only 4 banks, TPBank, PGBank, SHB and VPBank, had a decrease in loan/deposit ratio compared to the end of 2021. However, the decrease was not significant.

Loan/deposit ratio has exceeded 100% at many banks - Photo 2.

In general, the high increase in the loan/deposit ratio of the whole system in the past 9 months can be explained by the large phase difference between credit growth and deposit growth.

On the other hand, the members with this very high ratio mentioned above also reflect that they have other sources of capital to lend besides customers’ deposits.

According to the latest data from the State Bank (SBV), by the end of October 2022, credit growth of the whole system has reached 11.5% compared to the end of 2021. With the above growth rate, credit growth of the whole system has reached 11.5% compared to the end of 2021. Usage has increased by over 17% over the same period last year and is also a high level compared to the same period many years ago. Meanwhile, during the same period, capital mobilization only increased by 4.6% compared to the beginning of the year, which is only 1/3 of the growth rate of credit. This poses a challenge to the banking system in regulating the capital utilization ratio.

But will be noticeable in another impact. Deposits are usually more liquid and flexible in capital structure, increasing or decreasing is more difficult to control than credit, so when deposits are reduced, this ratio will increase because loans are difficult to reduce. to balance, especially in early withdrawal of deposits while lending is difficult to withdraw capital before maturity.

The above impact should be paid more attention when the market has strong fluctuations in interest rates, fierce competition to attract deposits in the system…

Hard to get more loans?

The loan-to-deposit ratio (LDR) is one of the important metrics used in the management and supervision of banking operations to assess the liquidity or solvency of a credit institution. .

A higher LDR ratio helps the bank to optimize its capital mobilization. However, along with that, the bank’s liquidity may also be affected. Simply put, when a bank lends too much, exceeding deposits, when short-term payment pressure increases dramatically, that bank may face difficulties.

Please also note, as above, the method of calculating the ratio that the writer does is not consistent with the calculation of LDR specified in Circular 22 issued on November 15, 2019 stipulating the limits and ratios to ensure safety. fully in operation of banks and foreign bank branches and takes effect from January 1, 2020.

According to this Circular, the mobilization sources of banks are not only in customer deposits but also from deposits of the State Treasury, deposits and specialized capital deposits of customers. money raised from the issuance of promissory notes, bills, certificates of deposit and bonds.

Also according to Circular 22, all banks must ensure that the LDR ratio does not exceed 85%.

The latest update of the State Bank shows that by the end of June 2022, the ratio of outstanding loans to total deposits of the whole system is only 74.06%, very low and not worrying.

However, if we look at the ratio of customer loans to customers as shown in the financial statements of the 27 commercial banks mentioned above, it shows that the level of lending is already at a high level. This is also a reference point for banks’ lending strength in the coming time.

As for liquidity, LDR or the above reference statistical ratio is just one of many indicators, limits and requirements in management; because current regulations also have limits on specific solvency ratios, as well as banks always have reserve funds and provisions accumulated during operation…

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