Banks cut interest rates
Source: 08-AUG-2008 Intellasia | 06/Aug/08 Dau Tu Chung Khoan page 24
Aug 8, 2008 - 7:00:00 AM After almost all commercial state-owned banks cut lending interest rates on late days of July, some commercial joint stock banks also started slashing deposit interest rates. The Saigon Commercial Bank (SCB) has applied new deposit interest rates following its slight reduction of deposit interest rates. Accordingly, the bank's highest deposit interest rate is 18.8% a year.

The Vietnam Technological and Commercial Bank (Techcombank) applied new deposit interest rates of less than 18% a year from July 21. However as for three to six-month terms, Techcombank still applies an interest rate of 18-18.1% a year. Many other banks such as Vietnam Bank for Private Enterprises (VPBank), Military Bank (MB), Orient Commercial Bank (Oricombank) and others have prevailing deposit interest rates of less than 18.5% a year. So, the highest deposit interest rate of over 19% a year or even 19.5% a year that were applied one-month ago, have been cut by some 0.5%.

That many banks have slashed deposit interest rates is good news for the market and ease pressure for banks themselves. Firstly, liquidity of banks have become more stable, banks have no longer raced to increase deposit interest rates because of capital shortage. Secondly, reducing deposit interest rates is expected to create favourable conditions for banks to reduce input expenses.

However, unlike noisy promotion campaigns when banks increase deposit interest rates, banks quietly slash deposit interest rates.

In fact, amidst the current situation, not only reducing interest rates but also announcing profits has been done quietly.

Sources of news from a commercial bank said that not because banks suffer from losses, they fail to announce profits. In fact, many banks that report high profits were also quiet because of various reasons.

Furthermore, many banks said that although banks still posted profits in the second quarter, business activities of the banking system will still meet with various difficulties from now until the end of this year. Thus, banks may find hard to fulfil their targets in late months of this year. Another reason why banks are afraid of announcing their profits is that while the central bank is applying the credit tightening policy, banks till announce high profits, which will result in big questions. The central bank also may recheck regulations on tightening credit, which can make operations of commercial banks harder.

Some commercial joint stock banks said that while the market is still presenting complicated movements, banks should be cautious and pay attention to each other's moves in order to revise and announce policies