Banks get caught in the middle

SeABank’s Ho Chi Minh City Cong Hoa branch office is offering prospective homeowners a credit line of up to 70 per cent of the house’s value. However, such interest rates remain high at around 24 per cent, per year.

Similarly, alongside dedicating VND1 trillion ($48.3 million) to finance import-export firms with preferred interest rates from 1.5 to 2.2 per cent, per year lower than benchmark rates of around 18.3 per cent per year, An Binh Bank (ABBank) also offers individual customers interest rates 1.5 per cent lower than set levels of a bit more than 20 per cent per year.

“Negotiable lending rates to individual customers at HDBank are relatively high at around 21-23.5 per cent per year, so the loan balance growth remains modest,” said Ho Chi Minh City-based HDBank’s deputy general director Dam The Thai.

Banks said they could not strongly cut lending rates because their deposit rates remained high.

The recent enactment of the central bank’s Circular 22/2011/TT-NHNN to supersede Circular 13/2010/TT-NHNN and Circular 19/2010/TT-NHNN abrogating regulations just allowing banks to use 80 per cent of deposits to lend, helps banks diversify lending sources.

However a Ho Chi Minh City-based bank director said banks’ hard task was to keep 2011 credit growth at less than the regulated 20 per cent, per year and gradually pull down the lending rate to non-productive sector to 16 per cent by the year’s end.

That was why the negotiable lending rates to the non-production sector remains almost unchanged from 20-25 per cent, per year compared to late July, 2011.

Latest State Bank statistics show that the credit growth was 8.85 per cent as of August 30, 2011 against 16.9 per cent growth in the same period of 2010, tantamount to a half of estimated full-year growth of 15-18 per cent.

New State Bank governor Nguyen Van Binh said there were positive changes to credit structures as regulated by the government.

“The central bank does not encourage banks to push up lending to the non-production sector despite the sharp credit fall in this field and banks are still urged to keep on track with the regulated 16 per cent lending rate to non-production sector by the year’s end,” Binh said.