TMB backtracks on interest

TMB BANK yesterday scrapped its zero interest rate for normal savings accounts after a public outcry on social media.
The bank, the seventh-largest in assets, had on Wednesday announced new interest rates on its website, which included zero interest for TMB’s normal savings account and TMB All Free account. The zero-interest move – the first in Thailand – was reportedly aimed at controlling funding costs.
Before the announcement, both products offered interest of 0.125 per cent per annum.
The bank’s move was discussed heavily in social media yesterday because zero interest for a savings account is unheard of in Thailand. Only current accounts offer a zero rate normally.
TMB executives yesterday held an urgent meeting after hearing the negative discourse on social media.
TMB board chairman Rungson Sriworasat yesterday afternoon asked chief executive officer Boontuck Wungcharoen about the change. Boontuck said customers were not ready for such a step, hence the bank had decided to restore the 0.125-percent rate to normal savings accounts.
Somchai Sujjapongse, permanent secretary at the Finance Ministry, which holds a 25.98-per-cent stake in TMB Bank, said the bank had informed the ministry of the move.
The zero-interest idea was floated as TMB is seeking ways to manage excess liquidity and the change was not reflective of a lack of stability, he insisted.
The zero rate was a signal from the bank that it does not want to acquire new deposits, and also to tackle higher funding costs. The ministry believes the bank will pursue additional measures – either lending more or launching new specific deposit products with high returns to customers, he said.
Somchai stressed that TMB’s move was not representative of the entire banking system.
Somchai, who is also chairman of the board of Krungthai Bank, said KTB did not intend to follow TMB’s example.
The downturn in interest rates will not attract depositors and investors who are looking at high returns to place their money in a savings account, said a banker who declined to be named.
Thai banks recently decided to cut their lending rates despite the central bank keeping its policy rate unchanged. The banks hope the lower lending rates will help reduce the financial burden on business clients who have been affected by the economic slowdown.
TMB CEO Boontuck said earlier that despite the lending-rate cut, the bank would try to maintain net interest margin at 3 per cent this year.
To manage NIM another way, the bank has trimmed the interest rate on No Fixed deposits slightly because the attractive features of this kind of deposit will ensure that customers are still happy with the interest rate, he said.
Negative interest rates are not the solution, Boontuck said.
Interest is not the key factor for depositors who place their money in a savings account but they attach importance to convenience of services, a banking source said.
TMB is expected to migrate depositors from normal savings accounts to TMB All Free accounts. However, if it offers interest of 0.125 per cent, it might not encourage existing holders of normal savings accounts to shift to TMB All Free, another executive banker said.
TMB says it has waived all transactional fees, which should offset the zero rate.
According to TMB’s first-quarter performance reported to the Stock Exchange of Thailand, the cost of deposits – Bt1.936 billion – was down by 7.8 per cent, compared with interest payments of Bt2.1 billion in the previous quarter.
As of the first quarter, TMB had total deposits of Bt638 billion, down from Bt645 billion, of which 28 per cent were savings-deposit accounts, including No Fixed deposit, ME by TMB and TMB All Free.
Meanwhile, Thanachart Bank is moving ahead to be a transactional bank by offering a fee waiver on its special savings account called Free-Ver.
The bank is attempting to migrate holders of normal savings accounts to a Free-Ver savings account as well. However, TBank will not take the zero-interes path, said Anurak Tantipipattana, senior vice president for current and savings accounts and e-banking. At present, a normal savings account at Thanachart Bank offers interest of 0.4 per cent per annum while Free-Ver offers 0.125 per cent.
Excess liquidity is not enough of a worry for the banking industry to require a bank to cut deposit rates to zero, said Thanyalak Vacharachaisurapol, Kasikorn Research Centre’s head of money and banking.