Many banks set a target to increase the current account savings account (CASA) this year. Still, in the beginning, it was not very favourable in Q1 when demand deposits dropped sharply.
All three banks with (the proportion of demand deposits in total customer deposits) currently the largest CASA, including Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Military Commercial Joint Stock Bank (MB MBBank), recorded non-term deposits decreased sharply in Q1/2020 due to the impact of Covid-19.
Customer deposits at Vietcombank only increased by 0.6 percent in Q1, to 934.048 trillion dong. In which, demand deposit dropped by 7 percent to 244.256 trillion dong. Accordingly, the bank’s CASA rate decreased slightly from 30.7 percent to 29.4%.
As for Techcombank, demand deposits reached 72.173 trillion dong at the end of Q1, down nearly 4 trillion dong compared to the beginning of the year. Accordingly, the estimated CASA ratio also decreased from 34.5 percent to 32.2%. This was probably the first time Techcombank had recorded such a strong CASA decline after about two years in a row pushing CASA up thanks to the zero-fee strategy and technology investment.
More surprisingly, at MBBank, demand deposits dropped by 22 percent to 71.852 trillion dong. On the other hand, special capital and deposit deposits also fell sharply by 57.9 percent and 24 percent to 1.964 trillion dong and 5.79 trillion dong respectively. Accordingly, the bank CASA dropped to about 33 percent but was still high compared to the industry average.
The reason for the decline in demand deposits at MBBank might stem from corporate customers when deposits of economic organisations at this bank decreased by 24.5 percent to over 115.45 trillion dong. At the same time, promises of individuals still increased by 4.6%.
At the largest bank in the system, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), demand deposits decreased by 11.5 percent to 157.764 trillion dong. Specialised capital deposits also dropped by 42 percent to over 7.2 trillion dong. Accordingly, although term deposits still grew, total customer deposits at BIDV recorded a decline of 1.24%, down to more than 1.1 quadrillion dong.
Or at another big bank, Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), the demand deposit of the bank at the end of March was 127.897 trillion dong, down by over 18.5 trillion dong, by 12.6 percent YoY. Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) ‘s non-term deposits also dropped by 8.8 percent in the first three months to 25.243 trillion dong.
Not only the above three banks but a series of other banks also decreased in this source of deposits such as Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), Asia Commercial Joint Stock Bank (ACB), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam International Commercial Joint Stock Bank (VIB), Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank), Vietnam Export Import Commercial Joint Stock Bank (Eximbank), etc.
Demand deposit was an important component of commercial banks’ capital mobilisation, which had the lowest interest rate of 0.1 percent to 0.5 percent per annum. Banks that owned this cheap source of capital would have the opportunity to reduce lending rates or increase profit margins, which was also one of the factors confirming the service quality and reputation of the system.
While Vietcombank and MBBank gained CASA advantages thanks to the huge deposits of large corporations, in the hands of the salary payment and payment system for domestic officials and employees, Techcombank had used the Zero Fee strategy to entice customers to deposit revenue into the bank.
In recent years, and especially in 2020, the source of demand deposits had become increasingly important for commercial banks as they had to reduce lending rates sharply.
Many banks also aimed to consolidate and increase CASA this year. VietinBank said that it would focus resources on promoting capital growth, especially on low-cost capital growth (sources of foreign currency, payment deposits CASA). VPBank had also identified four main drivers of growth in 2020, in which it wanted to increase its Non-term Deposit Rate (CASA) and Transaction Banking to optimise capital costs.
Vietcombank’s annual report stated that the bank would step up mobilising cheap capital sources through opening new individual customer accounts, boosting sales for customers to use banking services. Strengthening relationships with customers of the Group, the Corporation, Large enterprises, centralised capital management funds, ministries/industries with large capital sources to establish, maintain and increase the market share of deposits in Vietcombank.
The drop in demand deposits in Q1/ 2020 was likely to be short-term and timely when the end of the lunar calendar year, businesses had to withdraw money to pay expenses and pay salaries for employees. However, the goal of increasing CASA this year was quite challenging for banks. According to many experts’ forecasts, if the disease situation lasted long and business activities recovered slowly, it would affect not only credit but also deposits. Declining income could lead to more people to save less, even withdraw money to spend, while businesses with reduced revenues must further limit the money to pay at banks.
Perhaps that was why banks were looking for ways to attract people’s payment deposits with the exemption and reduction of service fees. Currently, 100 percent of local banks had confirmed the exemption/reduction of remittance fees for customers via the National Payment Corporation of Vietnam (Napas). Among them, 14 banks brought the customer fee to zero, accounting for 49.1 percent of the number of free transactions.
