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Banks optimistic, still aim to loan in foreign currencies   2010-08-10 - Thoi bao Kinh te Saigon

Though financial experts have warned that it would be very difficult for banks to increase outstanding loans in foreign currencies from now until the end of the year, big banks still claim they can find opportunities


Truong Van Phuoc, General Director of Eximbank, which provides credit to fund import-export deals, can see an opportunity to increase foreign currency credit in the last months, if the dong/dollar exchange rate is stable.


Phuoc commented that, in July, credit growth in foreign currencies, mostly in dollars, slowed in comparison with previous years. The dong/dollar exchange rate moved up, making businesses more cautious when borrowing in dollars.


He believes that foreign currency credit growth for the remainder of the year will depend on the foreign currency market and exchange rate. “If the exchange rate is stable or increases slightly by 1-2 percent, and foreign currency loans have low interest rates, businesses will keep borrowing in foreign currencies, and vice versa,” Phuoc explained.


He cannot see any signals showing that the exchange rate will increase significantly. The weakening of the US dollar against other hard foreign currencies recently will help Vietnam’s foreign currency market more stable. Meanwhile, macroeconomic factors are very good, so there are no factors that will create heavy fluctuations in the exchange rate from now till the end of 2010.


In principle, foreign currency credit growth will still depend on capital mobilization. While big banks like Eximbank say capital mobilization in foreign currencies has been growing well, smaller banks complain they are facing some difficulties.


A small HCM City bank’s general director lamented that credit in foreign currencies is not likely to increase in the last months because his bank cannot gain much capital.


“In general, we can mobilize a lot of capital from economic institutions. However, as the deposit interest rate applied to economic institutions has dropped to one percent, these institutions now would rather to sell dollars to banks instead of making deposits,” he detailed.


Moreover, he added, small banks do not have advantages in funding import-export deals, therefore, they will not have many opportunities to increase foreign currency outstanding loans.


According to the State Bank of Vietnam (SBV), the growth rate in foreign currency credit in the first months of 2010 was much higher than the capital mobilization growth rate. Therefore, many financiers believe that it will not be easy to increase foreign currency credit in the last months of the year.


Currently, bank lending interest rates in dollars are hovering around 5.5 -7 percent, while dong lending interest rates rest between 12 and 13.5 percent per annum.


Regarding the dollar price, some big joint0stock banks such as Eximbank and Sacombank have reduced dollar purchase prices slightly to 19,090 and 19,080 dong, respectively, as of August 9. Meanwhile, other banks, including Asia Commercial Bank and Vietcombank, have raised prices to 19,098 dong per dollar. Dollars are still reported as selling at all banks at a high rate, 19,100 dong.

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