Vietnam - Lending interest rates expected to drop

Most bankers agree that lending rates will fall further this year, having eased by one percentage point compared to the month before Tet.

Lending rates now vary among banks depending on their scales.

The lowest rates are offered by state-owned commercial banks, at around 17 percent a year. Meanwhile, large joint stock commercial banks offer rates of 18 percent - 21 percent per annum while smaller ones charge a yearly interest rate of 19 percent - 23 percent.

Since late last year, the Bank for Investment and Development of Vietnam (BIDV) has set lending rates at the maximum level of 15.5 percent a year for exporters, small and medium sized enterprises (SMEs) and the agricultural sector.

ANZ Vietnam has also launched a US$160 million (3.376 trillion dong) credit line aimed at supporting those SMEs involved in agriculture and textile and garment or seafood industries. The rate applied by the bank for these clients is one to two percentage points lower than the market average.

According to an executive of Vietnam International Bank (VIB), his branch the lowest lending rate is about 18 percent yearly and the highest is 21 percent.

He noted these levels had dipped over 1 percent against the pre-Tet period as his bank now focuses on healthy corporate clients to avoid credit risks.

The banker predicted borrowing costs from the second quarter would continue to cool down because the money volume injected by the central bank over the past few months had gone up sharply and deposits from the public had bounced back after Tet.

“Lending rates can be pulled down if the central bank is determined to implement the road map to merge weak banks and if all lenders agree to revise down the rates,” he said.

Tran Anh Tuan, general director of Nam A Commercial Bank, said his bank was lending at an annual rate around 19 percent for normal loans, adding the rate would ease to 16.5 percent - 17 percent for potential borrowers.

However, there are few customers enjoying this preferential rate given the bank’s limited capital source, which means it has yet to reduce the rate as soon as expected.

With a credit growth of 15 percent – 17 percent set for this year, Tuan said he would set aside 20 percent of current capital to serve exporters, enterprises in supporting industries and SMEs in accordance with the whole banking industry’s orientation.

Trinh Van Tuan, general director of Orient Commercial Bank (OCB), said most loans at his bank were charged at 19 percent – 20 percent per annum, a slight fall from previous times. His bank needed more time to reduce the rate further, he said.

The National Financial Supervisory Commission’s vice chairman Le Xuan Nghia said the lending rate would fall substantially this year because liquidity at small credit institutions had improved.

Bao Viet Securities in a recent report forecast lending rates would gradually shrink to 15 percent -16 percent per annum at the end of the year.

The stock broker predicted the rate decline would steadily follow slowing inflation and the fund mobilization capacity of the banking system, especially small lenders.

The exchange rate will be stable this year given ample supply of foreign currencies, according to economic experts.

They said optimistic signs on the exchange rate that emerged in late 2011 would continue this year.

Export this year will be adversely affected by continued economic woes, leading to less material import and a lower trade deficit - some 10 billion dong.

The US dollar will maintain its position as a strong currency, and may appreciate against other currencies due to the euro zone debt crisis. If inflation was curbed below 10 percent this year, the Vietnamese dong might fall 2 percent -3 percent.

Tuoi Tre

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