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Dong loan demand seen weakening
Demand for dong loans in Vietnam is expected to decline in the next three months as businesses and consumers, strained by record high interest rates, start to cut back on spending, bankers have said.
“Companies with good performance on average can make only 20 percent to 30 percent earnings before interest and taxes, so few can afford to pay 21 percent in interest to the banks,” an analyst at Habubank in Hanoi said.
“We are seeing a declining trend in new dong loans in the next three months as companies and consumers are forced to delay new projects or purchases,” he added.
Most banks this week are charging 21 percent interest on dong loans, the ceiling rate regulated by the central bank, after it raised the base rate for the dong three times this year, taking it to 14 percent as from June 11.
The base rate is used by banks to calculate dong loans and deposit rates.
“Some banks have to pay as much as 19 percent per year to raise dong funds from deposits so they have to charge more to stay in business,” a banker at a foreign bank in Hanoi said.
The central bank said in a weekly market report Monday that most banks were now offering 17-18 percent for dong deposits.
Outstanding bank loans in Vietnam were likely to be 20 percent higher at the end of the first half than a year earlier, but monthly loan growth would slow to 1.22 percent in June.
The central bank did not give the credit growth for the first half of 2007 but loans surged 54 percent in the whole of 2007, so the 20 percent growth so far this year shows a dramatic fall after three rate increases since January by the central bank.
VNA
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