Banks begin to cut back interest rates

Photo: Tuoi Tre

Many commercial banks Friday started to cut their deposit interest rates by 0.2 percentage points to 11 percent per year in compliance with a recent agreement.

The agreement, made between the Viet Nam Banks Association (VNBA) and the State Bank of Vietnam, asks banks to cut their interest rates to no more than 11 percent, instead of 11.2 percent.

The move is designed to urge banks to cut capital input costs and help enterprises access more credit.

Asia Commercial Bank (ACB) is the first bank to apply the new interest rate on 36 month deposits. Interest rates for one week to 24 month deposits range from 9.9 to 10.88 percent per year.

But ACB will give depositors cash as a bonus, which is equal to 0.15 percent of their primary deposit.

Earlier this week, Techcombank, DaiA Bank, HDBank also cut their deposit interests rates to below 11.2 percent.

As inflation pressures continue to grow during the final months of the year interest rate cuts would be executed with prudence with respect to the market’s behavior and the depositor’s expectations, said VNBA.

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Central bank holds steady on prime rate

The prime rate would be kept unchanged at 8 percent for the 11th
consecutive month as part of the ongoing effort to help commercial banks
lower lending interest rates, the State Bank of Vietnam said on
Sept. 27.

The refinancing and overnight rates for
electronic payments on the interbank market would also remain at 8
percent and the discount rate at 6 percent, the bank said.

Since the central bank gave the go-ahead for a negotiable interest
rate mechanism in March, the prime rate had not had direct impact on the
market lending interest rate that it used to, analysts said.

However, the benchmark interest rate was seen as a way of signalling
the monetary policy direction of the central bank at any given period.

The Government has ordered commercial banks to cut
lending rates to 12 percent and deposit rates to 10 percent in order to
help enterprises access credit.

Prevailing loan rates now range between 12-15 percent.

Many banks expected Circular No13's review to result in important
changes that would loosen credit requirements and help banks have more
capital on hand to make money and reduce interest rates./.

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Refinery lands 1b USD loan package

PetroVietnam has obtained 1 billion USD in financing for the Dung Quat
Oil Refinery, the Ministry of Finance announced on Sept. 23.

The Vietnam Development Bank will co-ordinate the financing package,
which includes 700 million USD from Government bond proceeds and the
remainder from French bank BNP Paribas, which is extending credit for
the deal through 2020 at an annual interest rate of 3.3 percent,
following a four-year grace period.

PetroVietnam
will borrow the bond proceeds for a 16-year term at a fixed interest
rate of 3.6 percent, following four year's grace.

The ministry has authorised Citibank's Trust Agency in New York to
collect interest on the 700 million USD loan made from Government bond
proceeds, while the Ministry of Finance will make interest payments
directly to BNP Paribas.

The financing will be
allocated to the Dung Quat Oil Refinery Plant No 1, which began
operating at 100 percent production capacity last month. The plant has
imported 5.7 million tonnes of crude oil and processed nearly 5 million
tonnes so far, delivering over 4.7 million tonnes of refined products to
market.

In order to ensure repayment, Circular No
114/2010/TT-BTC issued by the ministry late Sept. 23 requires
PetroVietnam to give highest priority to servicing the loans under this
package. If it falls past due, the Ministry of Finance will require
other lenders to freeze existing and further credit to the oil giant.

The ministry is preparing further risk-provision plans
to ensure repayment of the 1 billion USD debt at maturity and is
guaranteeing ultimate repayment from the State budget.

However, following the recent troubles of debt-laden shipbuilder
Vinashin, PetroVietnam was expected to set an example as the best
economic group in Vietnam.

Last week, the
Government instructed the Ministry of Finance to consider Vinashin's
request for 300 million USD in Government bond proceeds to service its
debt to French bank Natixis.

If this proposal is
approved, the 1 billion USD in capital raised by Vietnam's second
overseas sale of Government bonds – offering higher yields than the
lower-rated Philippines and Indonesia – would go to Vinashin and
PetroVietnam.

The bonds were expected to offer a yield of 6.95 percent and a nominal interest rate of 6.75 percent.

The bond sale was originally conceived to provide capital for energy
and infrastructure projects that would support growth in an economy
suffering from a shortage of foreign exchange./.

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Refinery lands $1 bln loan package

PetroVietnam has obtained US$1 billion in financing for the Dung Quat Oil Refinery, the Ministry of Finance announced Thursday

The Vietnam Development Bank will co-ordinate the financing package, which includes $700 million from Government bond proceeds and the remainder from French bank BNP Paribas, which is extending credit for the deal through 2020 at an annual interest rate of 3.3 percent, following a four-year grace period.

PetroVietnam will borrow the bond proceeds for a 16-year term at a fixed interest rate of 3.6 percent, following four year's grace.

The ministry has authorised Citibank's Trust Agency in New York to collect interest on the $700 million loan made from Government bond proceeds, while the Ministry of Finance will make interest payments directly to BNP Paribas.

The financing will be allocated to the Dung Quat Oil Refinery Plant No 1, which began operating at 100 percent production capacity last month. The plant has imported 5.7 million tonnes of crude oil and processed nearly 5 million tonnes so far, delivering over 4.7 million tonnes of refined products to market.

In order to ensure repayment, Circular No 114/2010/TT-BTC issued by the ministry late Sept. 23 requires PetroVietnam to give highest priority to servicing the loans under this package. If it falls past due, the Ministry of Finance will require other lenders to freeze existing and further credit to the oil giant.

The ministry is preparing further risk-provision plans to ensure repayment of the $1 billion debt at maturity and is guaranteeing ultimate repayment from the State budget.

However, following the recent troubles of debt-laden shipbuilder Vinashin, PetroVietnam was expected to set an example as the best economic group in Vietnam.

Last week, the Government instructed the Ministry of Finance to consider Vinashin's request for $300 million in Government bond proceeds to service its debt to French bank Natixis.

If this proposal is approved, the $1 billion in capital raised by Vietnam's second overseas sale of Government bonds – offering higher yields than the lower-rated Philippines and Indonesia – would go to Vinashin and PetroVietnam.

The bonds were expected to offer a yield of 6.95 percent and a nominal interest rate of 6.75 percent.

The bond sale was originally conceived to provide capital for energy and infrastructure projects that would support growth in an economy suffering from a shortage of foreign exchange.

 

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Lending rate almost beyond enterprises’ reach: report

The organizers of the survey Vietnam Business Insight Survey announce the results at a conference in HCMC - Photo: Thu Nguyet

HCMC – Many local enterprises are taking out short-term loans with interest rate of more than 12% a year, which they say they can’t afford for a long time, according to a survey report released on Thursday.  

The Vietnam Business Insight Survey, conducted among nearly 400 enterprises in the country, shows the current interest rate of short-term loans is nearly touching the unaffordable level for many local companies. It means many of them are hardly able to burden the high rate any longer.

The survey is made every quarter by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the General Statistics Office and Asia Competitiveness Institute, under the financial support of the Asia Foundation.  

In details, two-thirds of nearly 400 corporate respondents are borrowing short-term loans at an annual interest rate of more than 12%. About 60% of these enterprises say the lending rate is unreasonable, and 36% of them can’t afford the high capital cost loans in the long term.

Therefore, instead of borrowing from banks, they resort to other capital sources to support their operations and production, which negatively affects their investment strategy. According to the survey, about 94% of business respondents say under-12% lending rate is reasonable for them.  

Besides the expensive loans, the survey found many local companies are facing challenges from lack of electric power and skilled labor, and traffic congestion.  

In addition, local companies are coping with obstacles from the current business environment, said Vu Kim Hanh, vice chairwoman of Leading Business Club, at a conference to release the survey in HCMC.  

Hanh explained that they suffered fierce competition from fake, cheap and smuggled goods. Hence, some of them stopped their production and were having their products outsourced to China then labeled “Made in Vietnam” to reduce costs of the products.    

“Even some companies recognized as producers of high-quality Vietnamese products are outsourcing to China and label the goods as domestically made,” she said.  

Hanh added that local enterprises also told her that they were burdened by un-official fees but didn’t give any details. Costs for after-sales services, promotion and environment protection are challenging local producers.

The survey also shows local enterprises’ trade and production improved in the second quarter of this year compared with the first quarter.

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Lending rate almost beyond enterprises’ reach: report

The organizers of the survey Vietnam Business Insight Survey announce the results at a conference in HCMC - Photo: Thu Nguyet

HCMC – Many local enterprises are taking out short-term loans with interest rate of more than 12% a year, which they say they can’t afford for a long time, according to a survey report released on Thursday.  

The Vietnam Business Insight Survey, conducted among nearly 400 enterprises in the country, shows the current interest rate of short-term loans is nearly touching the unaffordable level for many local companies. It means many of them are hardly able to burden the high rate any longer.

The survey is made every quarter by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the General Statistics Office and Asia Competitiveness Institute, under the financial support of the Asia Foundation.  

In details, two-thirds of nearly 400 corporate respondents are borrowing short-term loans at an annual interest rate of more than 12%. About 60% of these enterprises say the lending rate is unreasonable, and 36% of them can’t afford the high capital cost loans in the long term.

Therefore, instead of borrowing from banks, they resort to other capital sources to support their operations and production, which negatively affects their investment strategy. According to the survey, about 94% of business respondents say under-12% lending rate is reasonable for them.  

Besides the expensive loans, the survey found many local companies are facing challenges from lack of electric power and skilled labor, and traffic congestion.  

In addition, local companies are coping with obstacles from the current business environment, said Vu Kim Hanh, vice chairwoman of Leading Business Club, at a conference to release the survey in HCMC.  

Hanh explained that they suffered fierce competition from fake, cheap and smuggled goods. Hence, some of them stopped their production and were having their products outsourced to China then labeled “Made in Vietnam” to reduce costs of the products.    

“Even some companies recognized as producers of high-quality Vietnamese products are outsourcing to China and label the goods as domestically made,” she said.  

Hanh added that local enterprises also told her that they were burdened by un-official fees but didn’t give any details. Costs for after-sales services, promotion and environment protection are challenging local producers.

The survey also shows local enterprises’ trade and production improved in the second quarter of this year compared with the first quarter.

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Latest technology, market info top priority for firms

by Mi Bong

HCM CITY — The ability to access market information and advanced technology were the two major factors affecting the business community in the second quarter of the year, according to Viet Nam Business Insight Survey.

At a seminar held yesterday in HCM City by the Viet Nam Chamber of Commerce and Industry, Pham Thi Thu Hang, head of the Business Development Institute, said the survey had received 374 responses from domestic enterprises.

Government investment in information and technology had helped further the use of advanced technology, they said.

Domestic and foreign market demand ranked second and third, respectively.

Some other influences included production costs, loan access, skilled human resources, infrastructure conditions such as water, electricity and wastewater treatment systems, transport infrastructure, land issues and site clearance.

The survey discovered that 65 per cent of businesses must borrow a short-term loan with an annual interest rate of 12-13 per cent and upwards.

Most of them said the interest rate was too high and would affect their investment plans.

The businesses said the interest rate should be adjusted to below 12 per cent to create favourable conditions to their production and business.

They expected there would be positive changes related to macroeconomic policies, loan access conditions and infrastructure improvement.

Vo Tan Thanh, director of the VCCI's HCM City branch, said the Viet Nam Business Insight Survey aimed to investigate and collect concerns and feedback from the business community through online fora.

It targets documenting the state of economy, industry and business environment in a timely and accurate manner.

The VBiS will also provide the Government as well as firms and executives with a precise and comprehensive insight into Vietnamese enterprise development and feedback on policy.

It was launched by the VCCI, the Asia Competitiveness Institute and the General Statistics Office under the sponsorship of the Asia Foundation.

At the seminar, Vu Van De, head of HCM City Statistics Department's Statistics-Industry Sub-Department, said industrial production growth in the first eight months of this year had increased 8.8 per cent over the same period last year.

The water and electricity distribution as well as production industry had the highest growth rate, 15.4 per cent, in the period.

The manufacturing and processing industry accounts for the highest, 60.1 per cent of total industrial production value, an increase of 11.6 per cent.

Challenges

Although industrial production has overcome the financial crisis period and seen a growth, it has faced challenges.

By early August, because of a drop in exports, the warehousing of manufacturing and processing products was fairly high, with an increase of 137.5 per cent over the same period last year, while consumption reached 112 per cent.

Power shortages in the first and second quarters affected the economy greatly.

Technical and trade barriers have made exports slow and unstable, causing a back-up of stored goods in the manufacturing and processing industry, according to the report. — VNS

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Interest rates rise for dollar deposits

Photo: Tuoi Tre

Several commercial banks have increased the annual interest rates they pay on US dollar deposits by 0.2 percentage points to an average of 4.5-5.2 percent, sparking worries of a new interest rate war.

Both Asia Commercial Bank and Eximbank have increased interest rates on three-month term deposits to 4.35 percent and on 12-month term deposits to 4.45 percent.

Vietcombank is offering 4.5 percent for a 12-monthterm deposit in US dollars while the Vietnam-Russia Bank, PG Bank and An Binh Bank are offering rates as high as 5.2 percent.

"In the latter part of the year the dollar supply is often limited, and to attract dollars, many banks raise interest rates," said Asia Commercial Bank deputy director Nguyen Thanh Toai.

Another senior official from the same bank who asked to remain anonymous said that the bank raised interest rates to hold onto its existing depositors and did not want to get involved in a new interest-rate war.

Total foreign currency deposits at the Ho Chi Minh City branch of the State Bank of Vietnam were down 4 percent last month against July to about $8.56 billion, according to the State Bank.

It was too early to tell whether a dollar shortage would solidify into a trend toward higher interest rates, said one treasury official at Vietcombank.

"The third and first half of the fourth quarter are the toughest time," he said. "December is the best time for dollars because of abundant remittance inflows and high export turnover."

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Interest rates rise for dollar deposits

Several commercial banks have increased the annual interest rates they
pay on US dollar deposits by 0.2 percentage points to an average of
4.5-5.2 percent, sparking worries of a new interest rate war.

Both Asia Commercial Bank and Eximbank have increased interest rates on
three-month term deposits to 4.35 percent and on 12-month term deposits
to 4.45 percent.

Vietcombank is offering 4.5 percent for a
12-monthterm deposit in US dollars while the Vietnam-Russia Bank, PG
Bank and An Binh Bank are offering rates as high as 5.2 percent.

"In the latter part of the year the dollar supply is often limited, and
to attract dollars, many banks raise interest rates," said Asia
Commercial Bank deputy director Nguyen Thanh Toai.

Another
senior official from the same bank who asked to remain anonymous said
that the bank raised interest rates to hold onto its existing depositors
and did not want to get involved in a new interest-rate war.

Total foreign currency deposits at the HCM City branch of the
State Bank of Vietnam were down 4 percent last month against July to
about 8.56 billion USD, according to the State Bank.

It
was too early to tell whether a dollar shortage would solidify into a
trend toward higher interest rates, said one treasury official at
Vietcombank.

"The third and first half of the fourth
quarter are the toughest time," he said. "December is the best time for
dollars because of abundant remittance inflows and high export
turnover."/.

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Cost of borrowing declines

HA NOI — The interest rate on loans at commercial banks from August 20-26 was lowered by 1 per cent to about 13 per cent per year.

This move aims to boost the economy after the State Bank of Viet Nam injected capital into the market to improve liquidity.

State owned banks are charging exporters, farmers and rural developers between 12-13.5 per cent per year for both short and long term loans. Private banks charge between 12-14.5 per cent.

The total trading volume on the inter-bank market was VND101.22 trillion ($5.19 billion) in Vietnamese dong and US$1.96 billion in US dollars, up 3.9 per cent and 1.8 per cent, respectively.

Most tradings in dong were made overnight and during the week. Overnight interest rates for the dong rose 0.08 per cent.

Average short term interest rates ranged from 6.78 per cent to 8.56 per cent per year.

The highest lending interest rate was 12 per cent and the lowest interest rate was 6 per cent.

The exchange rate hovers around VND19,480-19,500 per US dollar after the dong depreciated by 2 per cent last week. — VNS

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State Bank holds line on prime rate

The State Bank of Vietnam on Aug. 25 announced it would retain the
prime rate at 8 percent in September for the tenth straight month,
quelling market hopes that it might be lowered and borrowers enjoy a
more affordable stream of income from this source.

The unchanged rate is seen as a sign of stability.

The refinancing and interbank electronic payment interest rates will
also remain at 8 percent and the discount rate, at 6 percent.

The benchmark lending rate has been held steady since last November,
having been lowered by a percentage point back in early 2009 to spur
lending during the economic crisis.

Since the
central bank gave the go-ahead for a negotiable interest rate mechanism
in March, the prime rate has not had the direct impact on the market
lending interest rate that it used to. However, the benchmark interest
rate is seen as a way of signalling the monetary policy direction of the
central bank at any given period.

Lending rates at
commercial banks are now ranging from 12.5-15 percent per year for
Vietnamese dong loans but the SBV is trying to lower the rate to as
little as 12 per cent in order to help enterprises access more credit./.

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