Statistics of the National Financial Supervisory Commission (NFSC) show that by the end of the first quarter (Q1) this year, the mobilisation from economic organisations and the public increased by 3 percent compared to the end of 2017, in which mobilisation in dong grew by 3.7 percent while that in US dollars fell by 3.1 percent. Thus, the growth rate of mobilisation fund this year is significantly higher than the same period of last year by 2.6 percent. Previously, in 2017, the mobilisation growth was 16.9 percent, slightly higher than 2016.
Savings remains an attractive channel
In the end of last year and early this year, there were some forecasts mentioning that banks’ savings channel would be less attractive as the cash flows may shift to other channels in the context when the stock market continues to prosper and real estate is warming up.
However, results pointed out that capital savings remains attractive to many people. Last year, the total capital mobilised of credit institutions (CIs) was estimated at above 7,000 trillion dong, in which major banks such as Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Commercial Joint Stock Bank for Industry and Trade (VietinBank), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Asia Commercial Joint Stock Bank (ACB), Military Commercial Joint Stock Bank (MB), and Saigon Hanoi Commercial Joint Stock Bank (SHB) accounted for about 3,000 trillion dong. In Q1, in absolute number, about 200 trillion dong have been deposited at banks.
Money is still flowing into banks more and more even when the deposit rates decline. From the beginning of the year, short-term deposit rates in most banks (accounted for 80 percent of market share) have been far less than the ceiling level of 5.5 percent per annum, while long-term rates are only around 7 percent per annum, about 0.2-0.4 percentage point less than the second half of 2017.
In addition, some incidents involving customer deposit loss due to frauds of bank staffs, typically the one that occurred at Eximbank recently, does not affect depositors. If any, according to experts, the money perhaps may be shifted from a bank to a more “reputable” bank.
Banks expect people to deposit more and longer
A recent survey of the Monetary Forecasting and Statistic Department of the State Bank of Vietnam (SBV), credit institutions hope that the average mobilisation growth in the Q2 this year will be about 4.71 percent, much higher than Q1, and the annual mobilisation growth will reach about 16.65 percent, equivalent to the level of 2017 and 2016. Notably, CIs also expect deposits from six months to one year to account 83-86 percent of the total mobilisation in Q2 and throughout 2018, instead of deposits with terms of less than six months accounting for 77-82 percent as shown in the previous survey.
Perhaps banks have been overconfident in the market, banks have set rather ambitious plan for mobilisation this year. For example, Export Import Commercial Joint Stock Bank (Eximbank) is submitting shareholders the plan to expand mobilisation by 26 percent in 2018, while it was less than 15 percent in 2017. Meanwhile, Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) aims to mobilise 170 trillion dong, equivalent to an increase of about 30 percent compared to last year; and Vietnam Technological and Commercial Joint Stock Bank (Techcombank) targets a 40 percent mobilisation show.
Is it a dream come true?
Dr Bui Quang Tin from University of Banking Hochiminh city said that the above expectation of banks has lasted for many years. This expectation has become higher in the current period, when the confidence of the people is not as good as before due to the impacts of the recent incidents, such as loss of customers’ deposits or the arrests of many bank leaders, etc. However, it is very difficult to make a six-month to less than one-year deposits to account for over 80 percent of the total mobilisation.
The first reason, according to Dr Tin, one the trust of people is affected, they will not want to deposit on longer terms. While the profitability of other channels is currently very good, such as securities, real estate or start-up, etc., people will carefully consider the term of the deposit. The second reason is the insignificant difference of short-term and long-term deposit rates, while the risk is larger if depositing money on long terms. The third reason is that people and enterprises well know that when banks are having difficulties in mobilisation like now, they will increase deposit rates, especially small banks, thus customers will be less benefited if they deposit on long terms. The fourth reason is that since the Gross Domestic Product (GDP) this year is predicted to increase by nearly 7 percent, inflation can hardly be controlled below 4 percent and this will put pressure to increase interest rates. Lastly, in the context when markets are developing as currently, the capital need of the stock market and real estate will also grow up and that can easily lead to the race in interest rates among banks, therefore short-term deposits will be preferred.
