Banking sector – Liquidity comparative analysis of listed banks

• Recent turbulence has weighed on banking liquidity.
• We see limited risk to liquidity regarding current benign macro environment and healthier banking system.
• We analyze the liquidity comparison of some listed commercial banks to identify the difference among banks’ ability to manage liquidity risks.

Liquidity constraints due to recent turbulence

Following the FED‘s rate hike, the DXY has climbed to its two-decade high, creating downward pressure on the Vietnam dong in the recent few months. Therefore, the State bank of Vietnam (SBV) has raised the policy rates by 100 bps in late-Sep and sold USD in order to stabilise the currency market. Additionally, the widespread local investigations relating to property developers and corporate bond issuance fraud has weighed on banking liquidity in short term. Interbank rates have risen sharply in recent weeks and overnight and 1-week rates peaked at 8.4%/year and 9.5%/year on Oct 5. Meanwhile, deposit rates across all tenure of commercial banks have increased strongly 100 – 120 bps ytd.

We believe banking liquidity risk is limited

First, we see the authorities’ efforts in fighting against “dollarisation” and improving cashless payments in the recent years have brought positive results. Vietnamese people are more confident in VND and commercial banks which will secure for the system liquidity. Second, the macro environment is stable while banking system health has been improved significantly over years. Currently, about 20 commercial banks have met Basel II requirements, in which 6 of them have completed all three key pillars. Besides, the short-term deposit/long-term loans ratio for all banks has been declined to 34% on 1 Oct 2022, and will keep decreasing to 30% level from 1 Oct 2023.

Liquidity risk management is one key pillar of Basel III reform

Although there are currently no regulations for applying Basel III, some Vietnam banks such as TPB, OCB, HDB, VIB, VCB,… have actively pioneered the implementation of the norms, including capital adequacy, liquidity risk management and operational risk management. To recall, strengthen liquidity standards is the most important mission for banks to adapt Basel III, which provided them capabilities to overcome any possible systematic and liquidity risks in the future.

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