Bank depends on cheap capital

Many banks have identified their focus on increasing CASA proportion.Photo: Internet

Look for capital from CASA

Under the impact of the Covid-19 pandemic, banks had to respond to a wave of lowering interest rates, including mobilising and lending from regulators. Since the beginning of the year, the total interest rate reduction has fluctuated between1.2 to 2.4 percentage points. The deposit interest rate for the 12-month term is 5.8-6.9%, while the 6-month term is 4.2-6.7%. This deposit interest rate is not low in the context that banks have to find resources to cut lending rates.

In addition, banks also have to restructure old and new loans to customers affected by the pandemic. According to TPBank's estimate, this year, the bank's total income will be affected by about VND1,000 billion, including withdrawing receivables when restructuring debts, lowering interest rates for existing customers and new loans with interest rate is also 1.5-2% lower than before.

From the declining movements of interest rates, banks are looking for ways to manage to find low-cost capital to use, ensuring business results and positive profits.

For a long time, customer deposits account for the largest proportion in the capital structure of banks, when many banks account for over 80%,of which demand deposit (CASA) is considered by banks as a low-cost capital source when the interest rate is only 0.1-0.2% per year.

According to the survey, among banks across the country, Techcombank and MB are still the two leading banks in terms of CASA proportion.Techcombank's CASA reached VND97.5 trillion, an increase of 22.2% compared to the end of 2019. As a result, Techcombank's CASA ratio on customer deposits reached 38.6% at the end of September, up from34.5% compared tothe same period last year.Meanwhile, the proportion at MB is 33%, followed by Vietcombank with 28%, MSB with 22.6%, VPBank with more than 15%.

"Sacrifice" for the central goal

For many banks, increasing the proportion of CASA is in theirlong-term business strategy.Explaining CASA's growth, MSB leaders said that this is thanks to the bank actively implementing personalised product packages, investing in enhancing customer experience through digital transformationand deploying many special offers for customers using account packages.

MB is also focusing on digital banking, improving many digital products contributing significantly to increasing CASA from customers.Currently, the rate of transactions via digital channels at MB is at 80%, the number of customers using App MBBank is over 2.2 million people.

Meanwhile, at Techcombank, the cheap source of capital from demand deposits has been identified as the central goal to help the bank stay ahead in terms of asset profitability, with the program "Zero Fee - Free service"and the program "Unlimited Cashback" to contribute to changing the cash payment habits of the Vietnamese people.Similarly, VPBank's leaders also said that increasing the proportion of CASA is also the top target of the bank, by promoting digitalisation to serve customers' payment and transaction needs.

Moreover, according to experts, in order to reduce the cost of capital mobilisation, banks will look for measures to increase their CASA ratio because the larger the CASA ratio means the more cheaply capital the bank can mobilise.This will help improve the net interest rate (NIM) while keeping the lending rate at a competitive level in the market.

However, maintaining the high CASA rate at this time also presents many challenges.According to the General Statistics Office, as of the end of September 2020, capital mobilisation of credit institutions increased by 7.7%, a slight decrease compared to the same period in 2019 (up 8.79%).

Therefore, besides many banks with high CASA growth, there are still banks that "stalled", or only increased around 5%, such as NCB, OCB, BacABank, Kienlongbank.

The reason is due to the number of deposits.Lack of large demand from economic organisations and enterprises because these units do not have revenue sources, they must withdraw them to pay expenses.

It can be seen that the benefits of cheap capital are great, but it makes banks accept "sacrificing" income from service fees to implement policies to reduce, free account and transfer money.

Payments areaimed at attracting customers to open current accounts, thereby maintaining a large amount of demand deposits to increase the proportion of CASA.However, according to experts, in the context that banks' income from credit is decreasing due to the effects of the Covid-19 pandemic, banks still have to "stick" to the race.CASA rate is to improve income, so the target of fee exemption or reduction will still be implemented by some banks.