Banks open doors wide, but few securities investors entering

Commercial banks have resumed loaning to fund securities investments, but they have not attracted many clients. Securities investors seem to be indifferent.

Banks have been pushing up loans

HDBank has announced a package of VND400bil ($23.5mil)it plans to loan to fund securities investments with securities themselves being the mortgaged assets. The VND400bil is part of a plan on disbursement for consumer credit worth VND900bil ($52.91mil). The lending interest rate is about 1.2% per month on average.

Eximbank is lending to securities investors at the interest rate of 0.833% per month only, equal to the interest rate applied to consumer loans, though funding securities investments is considered risky. Clients can borrow sums not higher than 30% of the securities’ market values.

Besides loaning to fund house and car purchases in installments, Tien Phong Bank also provides loans to fund securities investments at the interest rate of 10.5% per annum. Its clients can also borrow sums equal to 30% of securities’ market values for 12 months. However, borrowers must not have had bad debt at the bank in the previous 12 months.

Unlike previously, when banks hesitated to give loans to securities investors, they are now opening their doors wide to investors. It is because they now have profuse capital and they need to push up loaning.

However, despite the efforts by banks, loans to fund securities investments just account for a small proportion of their total outstanding loans. As the stock market has been falling, investors are hesitant to make investments with loans.

While banks have been pushing up loans, securities companies have also been trying to push up services, like repo service, to attract more investors. However, according to Nguyen Viet Hai, General Director of ACB Securities, though the capital reserved for repo service is profuse, and the repo service fee has been decreasing, it is still difficult to attract clients.

Representatives of Thang Long Securities Company (TSC) also say that the number of clients using repo service has dropped significantly since the beginning of 2009.

Analysts have said that in the current conditions, though the banks’ doors are open wide, clients will remain uninterested in loans as they will be under pressure to pay debts to banks on time while there is no sign that the market is on its way to recovery and stock prices are increasing.