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Banks ease loan rates ahead of year-end   2008-09-23 - Reuters

The board displaying Asia Commercial Bank interest rates.  
Vietnamese banks have lowered their lending rates to help lift corporate borrowing at the year-end but bankers say they do not expect lending or deposit rates to be lowered much further while inflation remains high.



Vietnam has posted double-digit inflation every month – until this month – since last November. With inflation rate nearing 30 percent, one of Asia’s highest, the central bank had to cap the sector’s credit growth while banks offered depositors high rates to protect their funds.

The four largest lenders including three state-run banks offered overnight lending at 13.5 percent to 15 percent, down from 14-17 percent last week.

The average rate for the 12-month interbank loan eased to 18.04 percent this week from 18.08 percent last Monday, according to interbank rate fixings compiled by Reuters that include offers from other banks VNIBOS.

“Corporate demand for funds in the last months of 2008 is relatively high due to seasonal features,” said Chief Executive Ly Xuan Hai of Asia Commercial Bank, Vietnam’s fifth-largest lender.

“With lending and deposit rates at present, banks are sure to face losses if they have no income from funds investment, money trading and other bank services,” Hai was quoted Monday as saying in an interview with the Dau Tu Chung Khoan (Investment Securities) magazine.

State-run banks offered 17.26 percent for 12-month dong deposits in the week ending September 17, unchanged from the previous week while partly private banks eased their dong deposit rates by 0.15 percentage point to 17.47 percent, the central bank said.

State banks kept short-term dong loan rates unchanged at 20 percent, and 20.5 percent for medium and long-term dong loans, while partly private banks eased the medium- and long-term loan rates to 20.5 percent last week from 21.5 percent the previous week.

Hai said banks must still base their business on lending so “if banks reduce lending rates they could not do it strongly and without selection.”

The central bank aims to keep Vietnam’s credit growth this year at 30 percent to help contain inflation. But the State Bank of Vietnam, or the central bank, may lower banks’ reserve requirements so banks can cut lending rates to support economic growth, an official was quoted as saying last Friday.

A central bank review said Monday the dollar/dong exchange rate was stable early last week at VND16,580-16,620 per dollar. The dong then eased to VND16,670-16,730 dong per dollar late last week, reflecting a stronger dollar on global markets, it said.

Vietnam’s financial markets remained stable even though the U.S. financial crisis deepened, the central bank’s review said.

It set the dollar/dong mid-point at VND16,516 per dollar Monday, down from VND16,512 per dollar a week ago and VND21 lower than a month ago. The dong has fallen 2.43 percent against the dollar so far this year.

Banks are allowed to trade dollar and dong within a band of plus or minus 2 percent from the mid-point set daily.

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