Firms finally take the loan bait

The first half of 2009 was a headache for local bankers as US dollar deposits flooded banks, while the demand for dollar loans fell sharply.

But, things have changed since July. According to newly released State Bank data, outstanding banking system dollar loans at the end of July have gone up by 1.2 per cent against June. This was the first month-on-month increase in 2009. “This figure demonstrates a come-back to dollar credit of local enterprises,” said State Bank governor Nguyen Van Giau.

According to a Vietinbank official, in July alone, the bank extended almost $300 million in loans. “The $300 million is not a large number in normal market conditions, but after a six month decrease in the first half of the year, this amount is like the light at the end of tunnel,” said the official. At the moment, state-owned BIDV, Agribank and Mekong Housing Bank and the newly-equitised being Vietinbank and Vietcombank are capping dollar lending interest rates at 3 per cent, per year. While dollar deposit rates were not kept higher than 1.5 per cent, per year.

“The low lending rate attracted borrowers after the State Bank had few movements in controlling the exchange rate fluctuations,” said a Vietinbank official. Different from five lenders, some local joint stock banks have already started hiking dollar deposit rates again. Asia Commercial Bank and Eximbank have raised dollar deposit rates to new highs of 2.9 per cent, per year for 36-month terms, while 12-month terms were increased to 2.65 per cent, per year.

Dong A joint stock bank deputy general director Nguyen Thi Ngoc Van said her bank was planning to follow the trend. “Some others have already offered better deposit rates, while import enterprises have again shown interest in borrowing dollars,” Van explained. In May, amid the market dollar shortage, the State Bank and Vietnam Banking Association called for local banks to lower dollar deposit and lending rates to encourage enterprises to sell dollar holdings rather than depositing. However, so far, only five banks have followed the agreement.

BIDV’s Treasury Department vice head Vo Thi Sanh said joint stock banks could hike dollar deposits, but her bank would not. “We still have abundant available dollar deposit sources, thus we do not really need to attract more,” said Sanh. “However, as three state-owned banks together with Vietcombank and Vietinbank still dominate the market, the dollar credit market would not change much,” Sanh added.
The five banks are currently making up to 60-70 per cent of credit market.

By Ha Anh