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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Small firms steered towards higher interest consumer loans

Small companies are complaining that they are not able to access loans to do business unless they accept higher interest rates.

Nguyen Hai Son, who owns a small transport company in Hanoi, said he wanted to apply for a bank loan to buy three new cars to expand his business.

Son visited three banks and he was told that a corporate loan would only cover half of the cars' value. For a larger loan of up to 90 percent of the value, he was advised to take out consumer loans instead.

The problem is the interest rates on consumer loans are higher, at 16-18 percent a year compared to 13.5 percent on business loans. Son said his company is now stuck with either accepting high interest payments or being given much less money than needed.

Many other small companies also said they have been encouraged to get consumer loans to do business.

The government earlier this year ordered banks to bring down interest rates to make sure local businesses have enough capital. Borrowing costs are set to be cut to 12 percent and the deposit rate to 10 percent by the end of this year.

To ensure their profit targets are met, many banks have tried to boost consumer lending so that they can charge high interest rates.

Tran Xuan Quang, deputy general director of Bao Viet Bank, said banks do not have large amount of funds available for lending, so they try to choose clients who can bring them more profit.

Moreover, it would be easy for a business to meet consumer loans requirements, he said.

Economist Nguyen Duc Thanh of the Hanoi National University said small businesses are not large clients and it’s hard to tell whether their owners will use the loan for consumer or business purposes. As a result, they can be treated by bank rather harshly.

According to the central bank’s branch in Ho Chi Minh City, consumer loans as of the end of August accounted for 5.2 percent of total loans in the city.

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Gold deposit interest rates increase

Interest rates for gold deposits suddenly soared, ranging from a low of 0.5 percent to a high of 1 percent in response to a dramatic rise in the global gold market last week.

The trend of increasing gold deposit interest rates was initiated by large banks but is now picking up in smaller banks.

The highest increase, 1.1 percent per year, in three-month gold deposit interest rates came from the Asia Commercial Bank (ACB).

Phuong Nam Joint Stock Commercial Bank raised their interest rates to 1 percent, from a stable 0.55 percent, based on a different set of terms; Sacombank has doubled its three-month gold deposits interest rates to 1 percent; and Dai A Joint Stock Commercial Bank hiked up their interest rate to at least 0.15 – 0.6 percent.

An official at a small commercial bank revealed that his company needed to increase gold deposit interest rates in order to stave off competition from other banks.

Deputy Director of ACB Do Minh Toan said that many customers believed that the price of gold was too high and expected gold prices to drop soon. As a result, they borrowed gold with a low lending interest rate. To avoid risks, some customers paid premiums to buy insurance for gold borrowing.

General Secretary of the Vietnam Banks Association Duong Thu Huong said that increasing interest rates may be a mechanism for banks to comply with the State Bank of Vietnam's new guidelines requiring banks to raise their capital adequacy ratio from 8 to 9 percent.

Senior consultant of the World Gold Council Huynh Trung Khanh said that commercial banks and investors should be cautious as gold prices will continue to increase due to high global demand for gold.

Experts said gold was in short supply because businesses collected gold in their domestic markets for export. According to the General Statistics Office, Vietnam exported US$1.34 billion worth of gold, equivalent to about 36 tons.

In August alone, Viet Nam exported $768 million in gemstones and precious metals, most of which was gold. However, gold imports were scarce in comparison leading to a gold supply shortage in the domestic market.

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Gold deposit interest rates increase

Interest rates for gold deposits suddenly soared, ranging from a low of
0.5 percent to a high of 1 percent in response to a dramatic rise in the
global gold market last week.

The trend of increasing gold deposit interest rates was iniated by large banks but is now picking up in smaller banks.

The highest increase, 1.1 percent per year, in three-month gold deposit
interest rates came from the Asia Commercial Bank (ACB). Phuong Nam
Joint Stock Commercial Bank raised their interest rates to 1 percent,
from a stable 0.55 percent, based on a different set of terms; Sacombank
has doubled its three-month gold deposits interest rates to 1 percent;
and Dai A Joint Stock Commercial Bank hiked up their interest rate to at
least 0.15 – 0.6 percent.

An official at a small
commercial bank revealed that his company needed to increase gold
deposit interest rates in order to stave off competition from other
banks.

Deputy Director of ACB Do Minh Toan said that many
customers believed that the price of gold was too high and expected gold
prices to drop soon. As a result, they borrowed gold with a low lending
interest rate. To avoid risks, some customers paid premiums to buy
insurance for gold borrowing.

General Secretary of the
Vietnam Banks Association Duong Thu Huong said that increasing interest
rates may be a mechanism for banks to comply with the State Bank of
Vietnam 's new guidelines requiring banks to raise their capital
adequacy ratio from 8 to 9 percent.

Senior consultant of
the World Gold Council Huynh Trung Khanh said that commercial banks and
investors should be cautious as gold prices will continue to increase
due to high global demand for gold.

Experts said gold was
in short supply because businesses collected gold in their domestic
markets for export. According to the General Statistics Office,
Vietnam exported 1.34 billion USD worth of gold, equivalent to about
36 tonnes. In August alone, Viet Nam exported 768 million USD in
gemstones and precious metals, most of which was gold. However, gold
imports were scarce in comparison leading to a gold supply shortage in
the domestic maret./.

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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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