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Banks, investors shun collateralized loans
Lenders and share investors appear to have lost interest in collateralized loans after this year’s stock market dive.
Indovina Bank, a joint-venture between the Industrial and Commercial Bank of Vietnam and Taiwan-based Cathay United Bank, is cooperating with brokerages such as Bao Viet Securities, BIDV Securities, Saigon Securities Incorporation, VCB Securities and Viet Dragon Securities to offer collateralized loans to stock market investors.
But a plunge in share prices forced Indovina Bank to cut the credit limits for share collateralized loans, which used to be half of the market value of the shares.
Its maximum credit limit for loans for stocks with a market price between VND50,000 and VND90,000 (US$3.13-$5.63) a share, is now VND10,000 (63 cents) per share.
Investors using stocks with a market price of VND90,000 to VND120,000 ($5.63-$7.50) as collateral can secure loans at the rate of VND25,000 ($1.56) per share.
Indovina Bank’s collateralized loan rate is 1.35 percent per month.
A deputy director of a state-run bank said his bank had stopped offering security collateralized loans and is now focusing on loans to local companies or individuals who want to buy houses.
Private banks are also cautious about loans using shares as collateral.
Saigon Thuong Tin Commercial Bank Chairman Dang Van Thanh said investors were unwilling to use their stock portfolios as collateral because lending interest rates for security collateralized loans were too high.
DongA Bank General Director Tran Phuong Binh said his bank wanted to discourage clients from taking out security collateralized loans so it set a high interest rate of 1.7 percent a month.
Analysts said local lenders were reluctant to offer share collateralized loans because it is a struggle to sell collateralized shares when the stock market nosedives, as it did earlier this year.
The Ho Chi Minh City’s benchmark VN-Index has lost 42 percent of its value this year, more than wiping out last year’s gain of 25 percent.
Investors eschew share collateralized loans
Bao Viet Securities Joint-Stock Company’s Ho Chi Minh City branch said there were only a few investors using shares to secure loans, adding no repurchase contracts had been made over the past two months.
A representative of the brokerage said investors were shunning the service because of the higher loan interest rate.
“Another key factor is the fall in share prices. Investors are likely to suffer losses when the banks ask them to cough up more money or shares,” he said.
Nguyen Han, an investor with Saigon Securities Incorporation, has repaid the security collateralized loan he took out last year.
“Investors only secure loans when the profit they make from the market is higher than the loan interest rate,” he said.
“No one, even those who have idle money, dares to use such loans now the market is tumbling.”
Thanhnien
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