Local banks cut dong loan interest rates

Banks are nervously watching the country’s inflation rate

Vietcombank’s Ho Chi Minh City branch last week announced its decision to cut deposit rates by 0.12 per cent to 0.84 per cent, the second such cut within two weeks.
The bank’s new annual rates for one, three, six, nine and 12-month deposits are now 2.4, 5.52, 7.2, 7.68, and 8.04 per cent respectively.
According to Vietcombank’s Ho Chi Minh City branch director, Nguyen Phuoc Thanh, the move is in response to the falling demand for loans.
“Our ultimate aim is to offer businesses easier access to our loans,” he said.
The bank’s Ho Chi Minh City branch charges an annual rate of 9 per cent on loans for consumer, service and trade purposes and 8.88 per cent for manufacturers’ loans.
Other local commercial banks, including the Asia Commercial Bank (ACB), the Phuong Nam Bank and the Vietnam Import-Export Commercial Bank (Vietnam Eximbank) look set to follow suit by reducing both deposit and lending rates.
The Phuong Nam Bank is reportedly considering an interest rate cut of between 0.24 and 0.48 per cent.
“Our decision on the cuts will be announced within the next few days,” the bank’s general director Hoang Van Toan said.
Meanwhile, other institutions are awaiting further developments before introducing interest cuts.
Vietnam Eximbank general director Truong Van Phuoc said: “We are waiting to see the reactions of other joint-stock banks and our customers before making any decision, but the best lending interest rates now should be between 8.4 and 9 per cent.”
Decisions will also depend on how the country manages its inflation.
“The inflation rate as of the end of August is up 1.7 per cent on earlier in the year, indicating that it may not exceed 3 per cent by year-end, much lower than the 5 per cent target,” Phuoc said. “If this is the case it will be viewed as a signal for banks to reduce their lending rates.”