Brokerage firms increase fees for financial services

As many securities companies increase their fees for credit services, experts are warning that such moves in the current prolonged market downtrend will further suffocate money inflows to the securities sector.

Asia Pacific Securities Co raised its interest rates for loans yesterday, from 0.065 per cent per day (equivalent to 23.4 per cent per year) to 0.07 per cent per day (or 25.2 per cent per year).

VNDirect Securities Co (VND) on Monday also hiked interest rates charged on payment guarantees and advance payment (of proceeds from securities sales) from 0.06 per cent per day to 0.065 per cent per day.

However, the largest shocking increase came from Kim Long Securities Co (KLS), who from the beginning of this month raised their interest rate on securities mortgages to 27 per cent per year, applicable to two-month loans or longer, and to 25 per cent per year for loans of less than two months.

Other brokerage firms such as SME Securities Co and Hoa Binh Securities Co also increased the rates charged on payment advances to more than 0.066 per cent per day.

In reality, the wave of increasing lending rates at securities firms began in late 2010. Rates at that time were around 0.055 to 0.06 per cent per day, or 21.6 per cent per year.

However, adjustments have become more frequent, which companies have blamed on higher interest rates charged by commercial banks for securities lending. Securities firms play the role of a bridge between investors and banks and thus, when banks increased interest rates, brokerage firms had no choice but to raise their rates as well.

In addition, many securities companies have accumulated losses during the recent period and do not have abundant supply of capital available for lending.

Four out of six securities companies posting first quarter business results reported losses, including venerable firms such as Saigon Securities Inc (SSI) with a loss of VND102 billion (US$4.9 million); VNDirect Securities Co (VND) with over VND42 billion ($2 million); Au Viet Securities Co (AVS) with VND13 billion ($622,000); and Hai Phong Securities Co (HPC) with VND6 billion ($287,000) in losses.

Fee increases can reduce the speed of capital rotation and depress investor psychology, but many securities companies are forced to raise rates as they were trying to balance costs and capital in an effort to limit any possible losses, according to head of a securities companies who asked to remain anonymous.

“For securities firms who have not increased their rates, if they are likely to incur losses, they may be quite justified in hiking their rates,” he said.

Nguyen Tien Hoang, head of marketing department of IRS Securities Co, agreed that many companies were now hoping to survive by reducing costs and some had even decided to close transaction offices.

“The biggest difficulty for securities companies now is to maintain their business strategy and still stimulate investors to participate in the market,” Hoang said. — VNS

Tags: vietnam stock, Vietnam stock market, VNindex