Tisco holds down costs, plans higer interest rate
Tisco Bank is holding back on branch expansion in a bid to control operating costs, and is offering higher deposit interest to attract customers.
Metha Pingsuthiwong, executive vice president for treasury and private banking at Tisco Bank, said the imposition of higher fees on banks to help pay down the debt left over from the 1997 financial crisis and bail-out programme was having an effect. The premium contribution of 0.47 per cent of deposits and bills of exchange has led to slower demand for B/Es. In the scramble for funding, small banks have to compete with larger institutions by offering higher deposit interest.
“The higher premium is a crucial cost for small banks. However, we can deal with it because we have few branches,” he said.
He said B/Es were not as attractive as before because the bank cannot offer higher rates than for fixed deposits. The proportion of B/Es has gradually declined to 60 per cent at the end of the first quarter from 70 per cent previously.
The main depositors at Tisco Bank have accounts worth no less than Bt1 million.
The bank is promoting its so-called Diamond savings-deposit products that pay interest of 3 per cent per annum, higher than savings accounts at other banks. Customers are required to make a minimum deposit of Bt1 million, but have no limits on cash withdrawals.
The product is growing in popularity, and now accounts for nearly 10 per cent of the deposit portfolio. Moreover, the bank is expanding accounts below Bt1 million to prepare for the lower deposit protection of Bt1 million per account per bank, which takes effect in August.
The bank recently launched savings products for depositors of Bt100,000 by offering an interest rate of 2.75 per cent per annum; these customers also have no limits on cash withdrawals.
Tisco does not have to worry too much about chasing deposits even though it has few branches, Metha said, as the bank has excess liquidity and can serve loan demand even though it is facing higher costs. The bank targets loan growth of 12-15 per cent this year, and the growth in deposits must be in line with that.
Tisco Bank projects that its deposit portfolio this year will rise to Bt230 billion from Bt200 billion as at end of 2011.
