Stocks eat into local banks’ rich deposit momentum

Investors are turning their backs on banks to jump into stocks

Scores of investors have profited from the stock investments, compared to gold or hard currency trading, or putting money into banks, during the past two weeks. A commercial bank director said the diversification of limited money sources had hindered banks’ deposit mobilisation during the past two months.

“Banks’ recent lower deposit rates are also a concerning issue to attract depositors to put money into banks,” he said, adding that his bank would hesitate to sharply cut deposit rates but to keep eyes on inflation and base rate to decide.

In recent days, money in bank accounts has been poured into buying stocks. Bankers said depositors were withdrawing their savings from commercial banks to buy stocks as the country’s equity market became more attractive, causing more pressure on banks to mobilise enough deposits to continue lending activities.

Previously, commercial banks were also worried that their depositors shifting savings between banks from lower rates to higher ones. Recently, depositors also withdrew their savings from banks to buy gold to hedge against soaring inflation.

In the early months of this year, competition for mobilising deposits was fierce, resulting in an interest rate race between commercial banks, but some banks still failed to mobilise enough capital source. In July, total deposits of Ho Chi Minh City-based commercial banks were up by only 2.7 per cent on month.

Several banks were offering annual rates of 18 per cent, but the idle money inflows to banks remained weak, according to an unofficial source. Market analysts, however, warned that putting money into banks to earn interest was safer than buying stocks or gold, which could offer higher rewards but also bigger risks. “Investors should be careful as more speculators are trading stocks now,” said Quach Tuan Khanh, an analyst.