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Interest rate drop slows   2010-05-10 - Dau tu chung khoan

Though banks have been cutting negotiable lending interest rates, only several banks have continued to do so since early May. Banks say lending nterest rate decreases will slow because they find it difficult to slash deposit interest rates.


Lowered to reasonable levels?


After the Bank for Investment and Development of Vietnam (BIDV) eased the lending interest rate further by one percent, some other banks followed suit. Deputy General Director of ABBank Pham Quoc Thanh on May 4 commented that they reduced lending interest rates to 13.5-14.5 percent.


ABBank is applying a program to offer preferential interest rates for short-term loans. The bank is also funding export deals with preferential interest rates of 14-14.5 percent for dong loans and 5-5.25 percent for dollar loans. As for clients with good mortgage assets and credit records, ABBank offers loans at 13-13.5 percent per annum.


Thanh thinks that rates are reasonable and affordable for both banks and businesses already, having decreased by 3-3.5 percent from the previous month. Meanwhile, it is impossible to slash deposit interest rates now, as Thanh believes that the lending interest rate could be lowered in the time to come.


On May 5, the negotiable lending interest rate of Vietcombank was also eased by one percent. Currently, the bank is providing short-term loans at 13.92 percent per annum, a significant decrease from the previous rate of 15 percent. Loyal clients can borrow money at 13.5 percent per annum.


As such, the lending interest rate has dropped by 3-4 percent per annum over earlier this year. Bankers believe that the interest rate affordable for businesses is about 15 percent per annum.


Huynh Song Hao, Deputy Director of HCM City Branch of Vietcombank, noted that current lending interest rates are reasonable. In order to cut rates, banks must accept lower profits to share difficulties with businesses.


Though commercial banks have been urged to slash rates further, they maintain that it is difficult since deposit interest rates remain high.


Borrowers still hesitant


Despite the significant interest rate decreases, bankers report that outstanding loans have not increased.


According to Thanh, by the end of April 2010, ABBank’s outstanding loans had reached 13,554 billion dong, higher than that in early 2010 at 12,800 billion dong. Meanwhile, the total capital mobilized by the bank was 15,500 billion dong by the end of April 2010.


The interest rates in the interbank market decreased sharply last week by 0,02-1.51 percent per annum, showing that the demand for capital has decreased as credit growth has not improved.


Ngo Xuan Dung, Managing Director of VIB HCM City Branch, explained that borrowers hesitate to access bank loans even though interest rates are reasonable. Both businesses and individuals can borrow at 14-15 percent for short-term loans, 15-16 percent for medium and 16-17 percent for long-term loans.


Dung believes that individuals also are not borrowing because they cannot find profitable investment channels. People cannot invest in gold now that gold exchanges have shut down. Meanwhile, the real estate market remains quiet.


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