Banks to cut dong deposit rates further
27/Aug/2008 Intellasia | Reuters
Aug 27, 2008 - 7:00:00 AM
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Vietnamese banks, strained by high dong interest rates this year, are expected to cut rates on dong deposits further in the coming weeks due to ample liquidity and as they move to boost profits, bankers said.
They said overnight rates on dong loans had stabilised with banks fixing deals at around 16% this week, compared with around 14-17% last week.
"The trend to cut rates on dong deposits is very clear as banks have raised sufficient dong funds and now they need to increase margins to stay in business," a banker at a foreign bank in HCM City said.
Another banker said lenders would be operating at a loss if they had to pay 19-20% interest on dong deposits and lend at the regulated limit of 21% per year.
Bankers at the partly private Military Bank said the lender had cut annual interest rates on 12-month dong deposits to 17.5% last week from more than 18% previously.
The Hanoi-based bank had also cut rates on dollar deposits to 6% from around 8% previously.
The dominant Vietcombank also said it had cut rates on dong deposits to 17% for 12-month deposits and 16.5% on deposits with maturity from 24 to 60 months, reflecting its expectation that rates would fall further in the long run.
Meanwhile, even though some banks said they had reduced the prime dong loan rates to around 18%, the rates for non-prime clients remained at 21% per year, the ceiling lending rate allowed by the central bank.
"We will still apply the maximum interest rates allowed by the central bank on dong consumer finance loans in the immediate future and there is no plan to cut the rates yet," a Hanoi-based banker said.
Fixings for one-year Treasury bill yields advanced to 17.68% from 17.43% on Friday but were still below the 17.82% last Monday, and yields on two-year government bonds also rose to 17.41% from 17.05% last Friday.
The central bank set the mid-rate for the dong at 16,498 per dong, almost unchanged from a week ago while the rates were also stable on the black market at around 16,660 dong per dollar.
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