Demand deposits are an important component of capital mobilisation by commercial banks. This type of deposit has the lowest interest rate, usually only at 0.1-0.8 percent per year and the State Bank of Vietnam (SBV) has imposed a ceiling of one percent year. The mobilisation of large demand deposits not only helps banks raise profit margins, but also is one of the factors for the bank to confirm the quality and reputation of its payment system.
Surprisingly, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) and Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank) have the largest branch network but they do not have the largest amount of demand deposits. This position belongs to Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank).
At the end of March 2019, demand deposits (both in dong and foreign currencies) at Vietcombank amounted to 234.5 trillion dong. Meanwhile, BIDV and Vietinbank followed after that but there was a big gap: BIDV has 145.887 billion dong of demand deposits; Vietinbank has 120.212 trillion dong.
Banks are increasingly interesting the mobilisation of demand deposits. If a bank has high demand deposit rate on total customer deposits (CASA rate), it will have the competitive advantage of input costs, thus keeping the lending interest rate lower than other banks.
Vietcombank, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and Military Joint Stock Commercial Bank (MB) are the three banks with the highest proportion of demand deposits, respectively 28%, 27 percent and 25%. In particular, Techcombank has had the fastest rate of CASA growth in the last two years (at the end of 2017 only at 22%).
Techcombank said that the process of converting loan portfolio from medium and long-term loans to short-term would put pressure on reducing net interest income margin, but this had been effectively solved by reducing capital mobilisation fee. Promoting the growth of demand deposits on both individuals and economic organisations was one way.
In the structure of demand deposits at Techcombank at the end of 2018, deposits of economic organisations accounted for the majority with 56%, the rest were from individuals. The improvement of CASA rate helped this bank maintain net interest income margin (NIM) at 3.74 percent in 2018, higher than the average level of the industry.
For Vietcombank, the orientation in mobilising capital of the bank in 2019 will also follow the “buy wholesale and sell retail”, increasing the mobilisation of cheap capital, demand deposits and foreign currency deposits. In addition, the bank focuses on exploiting wholesale capital (high value and low cost), and increases the retail capital mobilisation rate higher than 2018.
The above three banks maintain a high level of CASA at over 25%, most of the rest are under 20%. Many big banks also have a common CASA rate of 10-15%. For example, VietinBank and BIDV are approximately at 15%, Asia Joint Stock Commercial Bank (ACB) (16%), Saigon Thuong Tin Joint Stock Commercial Bank (Sacombank) (14%) and Tien Phong Joint Stock Commercial Bank (TPBank) (16%).
Meanwhile, CASA rate in small banks is even lower, such as Vietnam Thuong Tin Joint Stock Commercial Bank (Vietbank) only 3.6%, Kien Long Joint Stock Commercial Bank (Kien Long Bank) 4.2 percent and Nam A Joint Stock Commercial Bank (Nam A Bank) 4%.
The interest rate of demand deposits, as mentioned, is almost zero, such as Vietcombank is only 0.1 percent per year and Techcombank only 0.3 percent per year, so it does not affect the choice of customers, but mainly for the payment or easy transaction.
