UPDATE 1-Little impact seen as Vietnam banks trim loan rates

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By Ho Binh Minh

HANOI, July 18 (Reuters) - Vietnam's largest partly private bank, Vietcombank, joined other big lenders in cutting loan rates on Friday but analysts doubted this would do much to lift business sentiment in an economy hit by double-digit inflation.

Vietcombank is the third bank to announce a reduction in lending rates this month after similar cuts by BIDV and Agribank. These three plus state-run Vietinbank are the country's largest lenders, accounting for 70 percent of the loan market.

Hanoi-based Vietcombank said in a statement it had cut its preferential lending rate on the dong by 1 percentage point to 20 percent and cut its dollar lending rate by 0.5 point to 8.5 percent.

One Hanoi-based banking analyst said Vietcombank, which numbers state firms among its clients, had more leeway on rates than many of the other private banks.

"It all has to do with liquidity. The private banks have to keep deposit rates high if they want to attract more funds, and consequently keep loan rates high to stay alive," he said.

"The state-owned banks have a different kind of clientele, which are state-owned companies and state-owned projects, so the lower rates don't really apply to everyone," he added.

The government is seeking to restore business confidence after tightening policy to contain inflation.