Banks to refocus on special savings amid low policy rate
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Banks will focus on special savings accounts to refill liquidity instead of fixed deposit accounts as the Bank of Thailand is expected to peg the policy rate at 3 per cent until year-end amid the worsening euro crisis, bankers said yesterday.
The central bank has left the rate at 3 per cent in the first four meetings of its Monetary Policy Committee this year, executives of CIMB Thai Bank noted yesterday.
Even though the financial crunch in the euro zone has hit Thai exporters only slightly, fiscal and monetary regulators here are trying everything to keep the economy percolating at 5-per-cent annualised growth. The BOT, which is the monetary regulator, is expected to leave the policy rate untouched at the next MPC meeting on July 25, said Sutee Losoponkul, an executive vice president of CIMB Thai Bank.
Dusanee Klewpatinontha, another executive vice president of the bank, said commercial banks had turned to strongly promoting savings accounts rather than time deposits because the difference in interest rates for the two types of accounts is not considerable.
The interest-rate gap between savings and deposits will be narrowed while the policy rate is low. This will influence customers to choose savings because up to Bt20,000 per year in interest income is exempt from withholding tax, she said.
Even though the bank expects the 3-per-cent policy rate will be maintained, rates on campaign savings accounts in the banking industry will rise because banks need to mobilise funds to serve skyrocketing loan demand.
The loan-to-deposit (L/D) ratio of the entire industry is 92 per cent, while at CIMB Thai Bank it is 90 per cent.
The interest rate of campaign savings accounts at CIMB Thai is 2.75 per cent – higher than the board rates of 2.5 per cent for fixed deposit accounts.
The rate for campaign savings accounts could climb to 3 per cent in the rest of this year.
Customers are expected to migrate their deposits from ordinary accounts to campaign accounts to gain a higher return during the stable policy rate period.
Fund mobilisation from campaign savings and ordinary deposits is now split 50:50.
The special rates that can be offered depend on the competition because the bank has to balance the L/D ratio and cost of funds to prevent its net interest margin from shrinking.
Depositors will surely gain from the rivalry in the deposit market because banks have to stress pricing to secure customers. Banks also have to improve investment products to lure new depositors and replace unappealing products such as bills of exchange (B/E).
B/Es are expected to drop below 5 per cent of total deposits this year from 19.9 per cent last year after the product was required to pay the same premiums to the BOT as deposit products.
Several banks have offered short- and long-term debentures instead of B/Es. Debentures issued by banks in the first half of this year reached Bt91 billion out of the total debentures issued by private companies of Bt237 billion. Debentures issued in the first half surpassed the Bt135 billion issued in the first half of last year.
Sutee said more bank debentures were expected to be issued in the second half, of which Bt10 billion will belong to CIMB Thai Bank.
New debentures this year are expected to soar to Bt400 billion.
Raising funds via deposits might not be enough to lure new depositors and expand the customer base because investors today are looking for complicated products that can respond to the desire for a healthy return on investment.
The bank will actively promote alternative investment products such as debentures, mutual funds, property funds and structured notes.
