Compile by Thiên Lý

 

Data recently released by the State Bank of Việt Nam shows that deposits by corporate customers at banks have been increasing since the beginning of this year.

 

By May enterprises had deposits of VNĐ5,036,953 billion, or 3.26 per cent higher than at the beginning of the year.

 

Individual customers had deposits of nearly VNĐ5,275,730 billion.

 

Corporates thus accounted for 49 per cent of total deposits, up from the average 40 per cent in past years.

 

The figure has surprised market analysts.

 

The COVID-19 pandemic is considered to be one of the key reasons for the surge in deposits by companies.

 

Analysts said the pandemic has severely affected some key economic hubs, especially HCM City, forcing many companies to suspend their operations for a long time. Since their spending has ceased, they have put their money in banks.

 

According to the General Statistics Office, around 85,500 businesses, a majority in the southern region, have had to close down in the last first eight months, half of them for good.

 

Experts also pointed out another reason the increasing amount of money businesses have in banks: the strong development of the capital markets.

 

The corporate bond market has in the last two years seen tremendous growth.

 

VNDirect Securities Company said in a recent report that the value of corporate bonds issued in 2020 was nearly VNĐ437.7 trillion (US$18.87 billion), an increase of 38.8 per cent from the previous year.

 

The market is also expected to be robust this year as the Government has issued loose regulations to encourage the market while also ensuring transparency and healthy development.

 

Banks’ active participation in the corporate bond market has also been also crucial in the issuance of large amounts of corporate bonds. Thanks to this, in the first half of this year the corporate bond market grew strongly despite the pandemic.

 

According to BaoViet Securities Company (BVSC), corporate bonds worth a total of VNĐ190.66 trillion ($8.3 billion) were issued in the first half of this year, up 6.18 per cent year-on-year.

 

In regard to the stock market, analysts said lower deposit interest rates at banks have persuaded individual investors to put their money in other asset classes like stocks.

 

Another reason for the increasing number of new investors is that the steep fall of the local stock market due to impacts on domestic economics that made 60 per cent of stocks have their market prices lower than their book values

 

The fact proved that cheaper shares contributed to tempting for thousands of individual investors to participate into the stock market, thus boosting both trading volume and value.

 

As a result, the number of new stock accounts has been breaking one record after another.

 

According to data from the Vietnam Securities Depository, there were  619,911 new accounts in the first six months of the year, an increase of 58 per cent from the same period last year, which too had seen a record number of new accounts. 

 

By the end of May the total number of securities accounts stood at more than 3.2 million, equivalent to 3.2 per cent of the country’s population.

 

The booming stock market has also persuaded many companies to issue shares to both new and existing shareholders. 

 

Thus, enterprises which had suspended production and could not spend money to start with became even more flush with cash and ended up depositing more money in banks.

 

Data of some securities companies also showed that in the second quarter of this year the total money at the accounts of securities companies’ customers was VNĐ86 billion, up by VNĐ21 trillion as compared to the first quarter. And of course, this money was being deposited at the banks.

 

Analysts said that corporate customers’ deposits are mainly made into payment accounts or demand deposits, helping significantly increase current account savings account (CASA) in banks.

 

The result is that, with the increase in CASA, lenders can lower their funding costs considerably since the interest on CASA is only around 0.2 per cent.

 

Meanwhile, according to banking experts, the higher the CASA ratio, the better the net interest margin (NIM), which enables the banks with higher CASA ratio to offer more competitive advantages as compared to the other lenders.

 

A higher CASA ratio also reflects a bank’s strength in having a comprehensive product suit as many value-added products and services are linked to customers’ current accounts, they said.

 

Techcombank, for instance, had among the highest CASA rates in the first half of this year of 55.1 per cent. This helped the lender have the lowest funding cost among its peers, which helped it achieve the highest NIM in the industry.

 

But analysts also expressed concern about the increasing deposits by corporate customers saying the decline in production would have an adverse effect on the country’s economy.

 

It is because when businesses’ capital could not be injected into production and business operations but be kept at the banks they could not provide products and services for the economy and also could not create employment for workers. Then, their profits would be affected too. — VNS