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Vietcombank Borrows $100 Million From Italy's Intesa SanPaolo   2008-07-03 - Reuters

Vietcombank, which settles a quarter of Vietnam's exports and imports, signed a deal on Wednesday to borrow $100 million from Italian Intesa Sanpaolo bank, underscoring tight liquidity conditions in the country.

Vietcombank, Vietnam's biggest partly private lender, is borrowing the money from Intesa Sanpaolo and the local bank's chairman indicated tight liquidity was a factor in the deal.

"Raising $100 million within a month is not simple now in Viet Nam," the chairman, Nguyen Hoa Binh, told Reuters on the sidelines of the loan-signing ceremony.

Demand for U.S. dollars is putting the state-controlled dong under severe pressure and has prompted the central bank to restrict access to foreign currency.

Vietnam's trade deficit almost tripled in the first half of the year over the same period of 2007 and soaring inflation led investors to flee the stock market, which is down more than 50% so far this year.

Banks are locked in a battle to attract dong deposits after the central bank ramped up interest rates and increased compulsory reserves to fight off inflation.

Moreover, a widening interest rate differential and inflation have caused a scarcity of dollar deposits and reduced the pool of available dollars for lending.

Executives at Intesa Sanpaolo and Vietcombank, or the Joint Stock Bank for Foreign Trade of Viet Nam, declined to reveal the interest rate on the loan.

Vietcombank became Vietnam's first state-run bank to sell shares last December. But it has delayed its listing on the country's stock exchange .VNI until the third quarter of 2008.

Vietcombank said its total assets at the end of June have risen 3% from the end of 2007 to 203 trillion dong ($12.3 billion), $5.3 billion of which were in foreign currency funds.

Vietcombank has said its overdue debt edged up to 1.4% of loans in the first quarter of 2008, from less than 1.3% in the year-ago period.


Vietnam's trade deficit nearly tripled in the first-half of 2008 to $14.78 billion compared with a year earlier, the government has said.

Consumer prices last month jumped 26.8% from June 2007 and the government has cut growth targets as one of its measures to cool off the overheating economy.

Vietnam's gross domestic product in the first half grew 6.5% from the same period last year, slowing from a 7.91% growth in the first six months of 2007.

Despite the slowdown, Intesa Sanpaolo said it has picked the Southeast Asian country as its only destination this year to open a representative office, expected to be in late 2008.

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