Vietnam banks look to small savings for stable funding

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Many banks in Vietnam are targeting retail savings as large but short-term deposits from corporate clients prove to be a volatile funding source.

Bankers said while term deposits from individual customers are usually small, they make up a stable source of capital for banks. On the contrary, large companies may deposit a lot of money into banks but only for a short period.

Nguyen Duc Huong, vice chairman of the Lien Viet Post Bank, said most of his clients in the northern region are farmers and salaried workers.

This customer base is growing strongly, allowing the bank to survive liquidity difficulties in 2011 and even this year, he said.

Nguyen Ngoc Bao, chairman of state-owned Agribank, said his bank, which focuses on the agricultural sector, is receiving savings from farmers and even a shoeshine man in Hanoi.

"These small savings always help ensure stable business for banks so that they can operate effectively without any risks," he said.

Banks are assessed not only by the quality of the loans they offer but also by the source of funding they can attract, said Nguyen Thanh Huong, editor-in-chief of the Banking magazine.

Large corporate clients often choose deposits with terms of less than one month because they only want to earn quick profits, Huong said. Many banks have faced liquidity problems partly because they tried to attract large but short-term funds at all cost, she added.

Last year, the banking system was left in a crisis after major corporate clients withdrew a total of more than VND70 trillion from their deposit accounts around the Tet holiday. The central bank had to increase money supply to improve the liquidity situation.

Now many lenders are trying to attract individual clients, offering better services and perks for even small deposits.

Truong Quang Luong, general director of the Kien Long Bank, said farmers and fishermen now account for 70 percent of the deposits at his bank.

Meanwhile, Tran Bac Ha, chairman of state-owned BIDV, said his bank will focus on the retail banking sector and seek more stable funds from individual clients.

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