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Banks taking diffident steps in resuming securities loans
The recovery of the stock market has prompted commercial banks to resume securities loans. However, they are far from being bold in their dispersal of new loans.
The prices of listed shares have recovered strongly since the State Securities Commission (SSC) raised the daily trading bands to +/-5% and +/-7% on transactions at the HCM City Stock Exchange and Hanoi Securities Trading Centre. The monetary market has been stabilised, while banks’ liquidity has improved. The interest rates on the market are expected to see sharp decreases in the time to come if the inflation rate for August is low and money is profuse. The move by banks to slash deposit interest rates shows that they do not lack capital.
Analysts say that it is now the right time for banks to consider resuming securities loans, which have been halted for some time due to the market’s falls.
Sacombank became the first bank to herald the resumption of securities loaning when providing VND200bil in capital to its Sacombank Securities Company so the company can resume securities loans and carry out repo contracts. These services are scheduled to be re-initiated at the end of August. Of that sum of money, 90% will be used to loan to securities investors (collateral in securities required), while the other 10% will be reserved for repo contracts.
It is expected that the interest rate on the loans will be 21%, or 1.75% per month. However, the bank will have a selective list of shares accepted as mortgaged assets for the loans, including high-liquidity share items.
Tran Xuan Huy, General Director of Sacombank, said that the bank will fund investors’ deals via Sacombank Securities until the outstanding securities loans reach 20% of total outstanding loans, the ceiling level stipulated in Decision 03 dated February 1, 2008.
Meanwhile, Tran Phuong Binh, General Director of East Asia Bank, said that in the immediate time, his bank will not consider resuming securities loaning, and it does not intend to develop this type of loaning. It stopped providing loans of this kind in late 2007.
“We are focusing on loaning to businesses, therefore, we do not have time to think of resuming securities loans,” Binh said.
Some other banks are also planning to resume securities loaning, but they are taking very cautious steps, due to concern that the stock market has not fully recovered yet. Moreover, as mobilised capital has been growing slowly, banks still cannot push up loaning, though they still far from using up the allowed 20% limit.
A senior official of VIB Bank said that though the difficulties on the stock market have been eased, VIB will still keep the door closed on securities investors until the stock market and monetary market return to operating stably.
Meanwhile, some securities companies under banks and independent companies have been trying to push up repo contracts.
ACB Securities Company, for example, is using its own capital to provide loans under repo contracts. The sums of money clients can borrow from the company must not be higher than 40% of market share prices at the moment of repo contract signing.
The company believes that the national economy and stock market have shown signs of recovery, which have had positive impacts on investors’ confidence. Therefore, it is now the right time for securities companies to boost their business.
VNN
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