Banks eye rate cuts to boost lending

Banks eye rate cuts to boost lending

Banks plan to expand credit in the second half by slashing interest rates and offering preferential loans to companies.

But some big banks, who have been assigned a growth cap of up to 17 per cent, have already admitted that the growth target would be impossible to achieve this year, despite the fact that credit growth has been improved recently due to interest reduction under 14 per cent per annual.

"We hope to expand credit by 12 per cent this year, but it will be really hard since we have only achieved 3.6 per cent growth in the first six months despite reducing interest rate eight times," Nguyen Hoa Binh, chairman of the Bank for Foreign Trade of Viet Nam (Vietcombank) was quoted as saying by Sai Gon Giai Phong (Liberated Sai Gon) newspaper.

"The bank has a target of 17 per cent. It has abundant funds and would like to lend more, but has to be careful and cannot dilute standards," Binh said.

The Asia Commercial Bank is attracting more customers as industries like rubber and garment have to import their normal second-half quota of raw materials, but admitted 17 per cent credit growth was hard to achieve.

"We are choosing some real estate projects in good locations to provide loans," Do Minh Toan, the bank's deputy general director, said.

The Eastern Asia Commercial Bank is also in negotiations with housing developers to lend at 12 per cent interest, but requires them to first reduce their prices.

The Export-Import Bank (Eximbank) has earmarked VND5 trillion (US$238 million) for lending at 10 per cent. The rate is ostensibly low, but still higher than the inter-bank interest rate of 4 per cent while other asset classes like stocks are also doing badly.

"How to help companies increase sales?" Chau Van La, chairman of the Tan Binh District People's Committee, asked.

"That would make them confident about borrowing more money for production."

Truong Van Phuoc, general director of Eximbank, concurred, saying the Government should consider policies to stimulate consumption without sparking off inflation again.

"The experience of Japan shows that too strong efforts to control inflation could cause deflation. Even 0 per cent interest rate cannot revive consumption then."

Experts predict fierce competition among banks to attract and keep good customers this year.

vietnamnews