While many joint stock banks have announced ceasing loaning to securities investors, other banks are trying to push up this operation, which proves to bring high profit.
SeABank Hanoi, for example, on August 20 announced that it would cooperate with SeABank Securities Company, belonging to the bank, to provide loans to securities investors with the mortgages being the securities themselves.
The bank will lend VND50mil at minimum for every deal and for six months. However, the bank requires high interest rates on the loans. For example, the interest rate for a six-month term loan is 1.1% per month. In case investors want to extend the loans, they would have to pay 1.32% per month. The borrowers will have to pay 1.65% a month for overdue debts. Moreover, they have to pay VND200,000 per deal for the so-called ‘credit management fee’.
The mortgage assets for the loans will be the securities items to be selected by SeABS, which are being listed on HCM City Stock Exchange (HOSE) and Hanoi Securities Trading Centre (HASTC). The market value of the mortgaged securities items will be the average closing price of the latest trading sessions. Borrowers are allowed to sell mortgaged securities, and right after the sale, they have to pay debts to the bank.
The Bank for Agriculture and Rural Development (Agribank) HCM City Branch has also signed contracts with Agribank Securities Company and Au Viet Securities Company to provide loans to stock investors. With Agribank, clients are allowed to borrow sums of money equivalent to 50% of shares’ value, and for 12 months at maximum.
It is said that Vietcombank and other state-owned banks, which have a percentage of loans for securities investments below the ceiling level of 3% of total outstanding loans, are trying to attract clients – securities investors – though they announced before that they would not pay much attention to this operation.
Loaning for securities investments proves to be a profitable business, and it is understandable why no joint stock bank refuses funding stock investment deals. These loans have been accounting for 10-40% of total outstanding loans of commercial banks.
The central bank has tried to limit the loaning for securities investments by issuing Instruction No 3, requesting banks to lower their outstanding loans for stock investments to less than 3% of banks’ total outstanding loans. The deadline for the implementation of the decision is December 31, 2007.
Source: VNE
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