Challenges for banks in luring non-term deposits
Challenges for banks in luring non-term deposits
It is much more difficult for banks to attract cheap capital from non-term deposits, or current account savings account (CASA), in the context of high interest rates on term savings.
With an interest rate of almost zero, CASA is always an important component in capital mobilisation of banks because it creates a cheap capital source, helping banks to reduce input costs and increase business efficiency.
In the past few years, besides having invested huge resources in digital transformation, technology, and experience enhancement, many banks have also raced to offer a series of free transactions on digital banking channels to attract CASA. Therefore, the CASA ratio of some banks sometimes reached 40-50 per cent of total deposits.
However, the CASA race passed its peak and has been reducing. Q1/ 2023 business results of banks reported a sharp decline in CASA at 27 out of 28 listed banks and this was not the first quarter that has seen a decline for CASA.
Specifically, Techcombank, which topped in terms of CASA for many years, saw its CASA ratio decline in the fourth consecutive quarter. By the end of the first quarter of 2023, the CASA ratio at Techcombank was only 32 per cent, down 5 percentage points compared to the beginning of 2023 and down 18 percentage points compared to the record high level of 2022. Techcombank's CASA value by the end of March was only VND124 trillion.
Military Bank's financial report for the first quarter of 2023 also showed the CASA ratio was at 35.5 per cent with a balance of more than VND160.8 trillion. The bank’s CASA ratio decreased by more than 5 percentage points compared to the beginning of 2023.
Similarly, although Vietcombank still topped the banking system in terms of CASA balance with more than VND387.7 trillion, the ratio of CASA to total deposits at this bank decreased from 33.9 per cent at the beginning of the year to 30.4 per cent at the end of the first quarter of 2023.
The ratio of CASA to total deposits at many other banks, such as MSB, ACB, VietinBank, Sacombank and BIDV by the end of Q1/ 2023 also decreased by 2 to 10 percentage points compared to the beginning of this year.
In general, 28 listed banks are holding more than VND1.5 quadrillion in demand deposits, down nearly 11 per cent compared to the beginning of the year.
According to a bank leader, who declined to be named, due to economic difficulties and less attractive investment opportunities while the interest rate on term savings from the end of 2022 to the beginning of the first quarter of 2023 increased sharply, customers have tended to transfer their money from current accounts to term deposits to enjoy higher interest rates.
However, based on data analysis, SSI Securities Company forecast the CASA ratio has been affected negatively only in the short term and will soon recover in the near future.
