Banks slashing lending interest rates

16:56' 11/04/2008 (GMT+7)
VietNamNet Bridge – On April 10, or eight days after cutting deposit interest rates, banks announced they will cut lending interest rates as well. Prior to that, experts believed that the move would not be made for another month at the earliest.
According to the State Bank of Vietnam, state owned banks offered the lowest lending interest rates in the last time, 14.6% per annum for short-term, 13.5-16.2% for medium- and long-term loans. Meanwhile, joint stock banks are asking for 18.42% for short-term and 21.85% for medium- and long-term loans.
The lending interest rates applied by joint stock banks once hit 25% per annum, when the market seriously lacked capital.
The high lending interest rates have been putting heavy burdens on businesses, consumers, thus indirectly increasing inflation.
The Bank for Investment and Development of Vietnam (BIDV) has announced it will slash VND lending interest rates by 2-2.5% commencing April 15. The bank’s lending interest rates will be between 12.5-15% per annum for short-term and 15-16.5% per annum for medium- and long term-loans.
Tran Bac Ha, Chairman of BIDV, said that the decision aims to share difficulties with businesses and help curb inflation.
BIDV has suggested setting caps on lending interest rates, 15.25% for short-term loans for manufacturers, 14.75% for short-term loans for exporters, 15.75% for medium- and long-term loans. It has also suggested the cap of 8.5% per annum for US$ loans.
Also on April 10, Military Bank (MB) stated that MB banks will always be 3% lower than the average interest rate on the market.
Besides BIDV and MB, some other joint stock banks have also revealed their plans to slash lending interest rates. Tran Xuan Huy, General Director of Sacombank, said that the bank is considering cutting the lending interest rate by 1% per annum, while prioritising lending to small- and medium-size enterprises which have good business plans.
East Asia Bank (EAB) has announced it will cut its lending interest rate by 1.2% for good clients. Meanwhile, Eximbank is considering cutting interest rates on all kinds of loans with the highest possible decreases of 2.4% per annum.

As big banks all are cutting interest rates, it is expected that other banks will have no other choice than following the move.



The interest rate cuts prove to be good news for businesses, 60% of which rely on bank capital. The credit growth is capped at 30% in 2008 as stated by the State Bank of Vietnam.



In related news, commercial banks, to everyone’s surprise, have announced satisfactory business results for the first quarter of 2008, despite the big difficulties due to the monetary tightening policies.


Sacombank has reported the profit of VND435bil for Q1, up by 44% over the same period of last year. VND435bil in profit proves to be a satisfactory result if noting that banks’ profit always increases sharply from second quarters of years.



Meanwhile, Asia Commercial Bank (ACB) has announced the impressive profit of VND501bil in Q1, or 1.2 times higher than that of the same period last year. The high profit in Q1 makes the bank believe that the targeted profit of VND2,500bil is within reach.



Military Bank said it got the profit of VND240bil in Q1, fulfilling 31.2% of its yearly plan. Meanwhile, Techcombank has announced the pre-tax profit of VND220bil, confirming that the target of the double profit in 2008 compared to 2007 will be reached.



However, analysts say that good business results did not come to all commercial banks in Q1. Other banks, which will report business results in some days, may not be happy with their business, especially small banks, which had to mobilise capital at very high interest rates.