PRESENTATION - GROUP 3

Topic: Deposit products and prices of selected commercial banks

in Vietnam: figures and issues

Members: Nguyen Sy Duc

Pham Ha Duong
Dinh Duc Hai
Nguyen Yen Khanh
Trinh Khanh
Linh
Vu Bich Ngoc
Nguyen Hoang Tuan Nam
Nguyen Hoang Viet

Time: 30 minutes

I. News (Dương)

II. Overview of deposit products and prices of selected commercial banks

in Vietnam
2.1. Definition of Deposit Products:
2.1.1. What is a current account?
A current account, also called a demand deposit account, is a basic checking account.
Consumers deposit money and the deposited money can be withdrawn as the account
holder desires on demand. These accounts often allow the account holder to withdraw
funds using bank cards, checks, or over-the-counter withdrawal slips. In some cases,
banks charge monthly fees for current accounts, but they may waive the fee if the account
holder meets other requirements such as setting up direct deposit or making a certain
number of monthly transfers to a savings account.
2.1.2. What is a term deposit?
Term deposits are created by opening of a deposit account as the client concludes a
contract with the bank and in accordance with this contract the client deposits a certain
amount of money in the bank for a preliminary fixed period of time as the bank is obliged
to pay out certain interest at a definite time (at the end of the agreed period, in advance or
in other preliminary defined period, e.g. at the end of each month).

Term deposits are with a fixed period for which the interest rate agreed between the bank
and the client is valid. The interest rate on term deposits is higher compared to that on a
current account and it usually increases when the term of the deposit for which the
contract is concluded is enlarged, e.g. 6 months, one year, etc. If the deposit is drawn
earlier than the agreed period, the client usually loses the interest or a part of it. If the
client wants to deposit additional funds on a term deposit, it is recommended the client to
ask for the existence of an option for depositing funds at any time until the expiration of
the deposit without breaking the agreed interest. It is accepted that the interest rate on the
deposit is announced on a yearly basis as a simple interest rate but not for the agreed term
of the deposit. For example, if a three month deposit is concluded and the interest is 4%
on a yearly basis, at the maturity of the deposit the interest that the client will get is 1%
on the amount of the principal.

2.1.3. What is a saving deposit?

Saving deposits are opened for keeping clients’ money against issuing a saving book to
the client or a document containing similar data. The account on which a saving deposit
is opened is usually unlimited, i.e. the client may draw and deposit money at any time.
However, it is possible the bank to envisage a period of notice, which means that it is
necessary for the client to declare the intention to draw the money from the saving
account in advance. Despite saving deposits are very similar to current accounts, there is
usually a condition or an event that should occur to enable the client to draw the
accumulated funds on the saving deposit and for that reason the interest offered on saving
deposits is usually higher than that offered on current accounts. Child’s saving deposits
offered by some banks today were also very popular in the past as a type of a saving
deposit.
2.1.4. What is an overnight deposit?
Overnight deposits are deposits with a maturity of one day. These deposits are usually
made by corporate or institutional clients to the banks for big amounts of money. The
interest rate on overnight deposits is usually higher than the interest rate offered on
current accounts.

2.1.5. What is a structured deposit?

Structured deposits are still not typical for the Bulgarian market but they are already
offered by some banks. These deposits combine the characteristics of a typical deposit
with an investment on the capital market. The payment of interest or premium on that
deposit depends on an index or combination of indices, financial instrument or a
combination of financial instruments, stock or combination of stocks or other tangible or
intangible assets, exchange rate or other similar factors.

2.1.6. What is a balance and changes of the account balance?

A balance on an account means the accumulated funds on the client’s account at a certain
date. All inflows and outflows as a result of ordered and received transfers on the
account, drawing and depositing of funds as well as funds from buying and selling
currency are called changes of the current account balance.

2.1.7. What is the maturity of a deposit?

The maturity of a deposit is the date when the deposit contract expires as this date is fixed
in the contract with the client. This is the date on which the full amount of interest is
accrued and the client is free to use the money from the deposit. For example, after the
deposit has been matured the client may draw and deposit funds, may change the time of
the deposit, or transfer it into another type of a deposit.

2.1.8. What is the difference between simple and capitalized (compound) interest?
The simple interest is calculated only on the amount of the principal of the accumulated
funds as the accrued interest for the definite period is not added to the principal. In
contrast to the simple interest, the capitalized or the compound interest is calculated by
adding to the principal the accrued interest from the previous period and in that way it
brings yield for the next periods together with the principal.

2.2. ACB - Asia Commercial Bank

2.2.1.Personal Customer: all is time deposit
2.2.1.2SAVINGS DEPOSIT IN FOREIGN CURRENCY TERM (USD, EUR)
Utility:
 You may withdraw funds and transfer ownership
 You may withdraw funds before maturity. On the deposit date or before due date,
you may require ACB transfer to another new term for the initial term.
 You can transfer the ownership when passbook is undue payment to conserve the
interest.
Target:
 Individuals in Vietnam
 Individuals who reside abroad
Deposit term: Announce in each period (from 1 to 36 months).
Currency: USD, EUR.
Minimum deposit amount: 100 USD, 100 EUR.
Method of interest payment: Quarterly, at maturity.
Transaction documents: Interest rate: Corresponding to sending level and deposit
tpaper of savings deposit, withdrawal savings, application for transfer.
erm at the time of deposit.
2.2.1.2.SAVINGS DEPOSITS BY VND TERM:
Utility:
 You may withdraw funds before maturity.
 On or before the deposit due date, your bank may require ABC to transfer to
another new term for the initial term.
 You can transfer ownership when passbook undue interest payment to conserve.
Target: Individuals of Vietnam and foreigners.
Deposit Term: Published in each period ( from 1 to 36 months)
Currency: VND
Minimum amount: 1,000,000 VND
Interest rate: Corresponding to sending level and deposit term at the time of deposit.
Method of interest payment: Quarterly, at maturity.
Transaction documents: saving deposit written, withdrawal savings written, application
for transfer.
FLOATING- RATE SAVINGS
A floating interest rate is an interest rate that moves up and down with the market or an index. It
can also be referred to as a variable interest rate because it can vary over the duration of the
debt obligation. This contrasts with a fixed interest rate, in which the interest rate of a debt
obligation stays constant for the duration of the loan's term.
Utility:Floating meets customer expectations through interest rates and attractive utility
as follows. Flexibility under the market interest rate with the interest rate that manually
adjusts at the beginning of each period of interest payment (1 month, 2 months, 3 months,
6 months, 9 months or 12 months).
Deposit Term: 36 months – draw Interest periodically
Interest receiving term: a period of 1 month, 2 months, 3 months, 6 months, 9 months
or 12 months dependent on customer choice.
Currency: VND or USD
Minimum amount: From above 5,000,000 VND or above 500 USD.
Interest rate: Adjusting Automatically, corresponding to Floating interest rate at the
beginning of the period of interest payment.
Method of interest payment: Customers may specify the method of interest payment in
cash or transfer the interest into account ATM2 + (For TGTK VND) or capital interest
automatically.

2.Corporate customer
TIME DEPOSIT:
Utility:
 Many tenors for your choice with attractive interest rates
 Simple procedure, quick processing
 Account opened at one place, made transactions at many places.
 To be secured for loans, to act as guarantor for the third party to borrow at ACB
 To be secured for opening a credit card with your balance account.
Target customers: Vietnamese and foreign organizations
Currency: VND, USD, EUR.
Minimum initial deposit:VND 1,000,000/ USD 100/ EUR 100
Interest rate: Under the provisions of the ACB in each period.
Interest payment method: term-end. On maturity day, interest will be automatically
added to your current account or to your initial principal (depends on your request)
TIME DEPOSIT with FLEXIBLE RATES
Utility:
 Optimize the capability to get profitability from idle funds
 Select deposit term corresponding to leisure time of cash flow
 Safe and secure
 To be secured for loans, to act as guarantor for the third party to borrow at ACB
Target customers: Vietnamese organizations (not including credit institutions such as
banks, financial leasing companies, and financial companies, People’s credit fund)
Currency: VND
Term: at least 7 days
Minimum initial deposit: VND 3,000,000,000/an account
Interest rate: depend on a negotiation between ACB and customers according to market
situation at each period.

III. Figures

Deposit Growth from 2013 to 2019

The analysis results from the financial statements of the commercial banks selected
for research show that, after only 4 years from 2013 to June 2019, the size of total
customer deposits has increased by 2.4 times (Total deposits Commercial banks'
customers as at 30/06/2019 were VND 7,318 trillion compared to VND 3,067
trillion as at 31/12/2013).

The average growth rate of customer deposits in the period 2013 - 2017 was
18.2%, of which, the highest growth rate was in 2013 with an increase of 22.2%.
Deposit growth has been maintained steadily at 2 digits, however, the growth rate
has tended to slow down in recent years. In 2018, customer deposit growth at
commercial banks reached 11.8%, the lowest in the period of 2013 - 2019. (Chart
1)

2.2. Classification of customer deposits by term

 Thus, it is possible to classify the terms of customer deposits as follows: Short-
term (tenors of less than 12 months), medium-term (periods of deposits from 1 to 5
years) and long-term (periods of deposits are over 5 years).

2.3. Current situation of customer deposits by groups of banks

To increase efficiency in comparing and evaluating, we divided the banks into four
groups according to the size of their charter capital as of December 31, 2018.
Specifically, the groups are as follows:

- Group 1: Charter capital of over VND 20,000 billion (4 commercial banks)

- Group 2: Charter capital from 5,000 billion VND to 20,000 billion VND (16
commercial banks)

- Group 3: Charter capital from 3,500 billion VND to under 5,000 billion VND (2
commercial banks)

- Group 4: Charter capital of under VND 3,500 billion (8 commercial banks).

-> By scale and growth rate

Compared with the average growth rate of customer deposits of the commercial
banking system, banks in group 1 (18.7%), while banks in group 2 are at the same
level (19.5%), The growth rate of group 3 and group 4 banks is 1.5% higher than
the average rate of the system. (Chart 3)
  Total Deposit 2019-2020

According to statistics from the financial statements of the fourth quarter of 2020
of domestic banks, by the end of December 31, 2020, the total customer deposit
balance of banks reached nearly 6.78 million VND, up 13.6% compared to the end
of 2019.

Top 10 banks with the highest amount of customer deposits are BIDV,
Vietcombank, VietinBank, Sacombank, ACB, MB, SHB, Techcombank, VPBank
and HDBank.

The total amount of deposits of these 10 banks is more than 5.33 million trillion
VND.

By the end of 2020, BIDV is the bank with the largest amount of customer deposits
among banks that have announced their financial statements, with nearly 1.23
million billion dong, up 10.1% from the end of last year.

Accordingly, BIDV is keeping a long distance from the two other "big players",
Vietcombank with more than 1.03 million VND (up 11.2 percent) and VietinBank
with 990,331 billion VND (up 10.9 percent).

Banks with the highest growth rate in the past year include HDBank (up 38.6%),
Nam A Bank (up 38.9%), VietBank (up 30.5%) ...
* Interest Rate in 2020
SCB is the bank with the highest deposit interest rate for all terms among 10 major
banks. This bank also posted a much higher interest rate for online deposit than
depositing at the counter.
SCB's 1-month interest rate is listed at the maximum of 4% / year (for online
deposit) and 3.95% / year (for counter deposit). SCB's 6-month term interest rate
when depositing at the counter is currently 5.7% / year, while online deposit is up
to 6.45% / year. The 12-month and 24-month interest rates were 6.8% and 6.95% /
year, respectively, near the highest on the market.
Deposit interest rate as at 15/3/2021, applied to ordinary customers, the deposit
amount is less than 1 billion VND.
IV. Issues
4.1. The growth of the disproportion between credit and working capital

In terms of Bank transactions, Working capital is considered to be regular and primary

input in order to maintain the bank’s liquidity, offset the shortage in payment and raise
the capital. In Vietnam, credit organizations play a vital role as the primary capital
resource, especially the short-term capital of enterprises.

In 2019, competition of interest rate which is acrimonious warmed up the bank market
throughout the 3rd quarter. At this time, in order to attract long-term deposits, banks
frequently push up interest rates through normal deposits and issue long-term deposit
certificate products.

Explaining the reason for the interest rate race, according to economics specialists, small
commercial banks must raise up capital resources to meet the strict requirements of the
State Bank. Due to the policy of credit tightening in the real estate sector which is one of
the important drivers of credit growth many years ago, credit growth in 2019 was kept at
a moderate level. On the other hand, some enterprises have difficulties in production and
operating, so they reduce their loans from banks or look for other mobilization resources.
Otherwise, the reason that commercial banks have to raise interest rates to mobilize
deposits from residents is that the State Bank tightens the money supply, while the
demand for lending is still increasing. The decline in money supply forced commercial
banks to increase working capital.

According to researchers, both enterprises and banks have difficulties in interest rate race:
About enterprises:
- Operational capacity of small and medium enterprises is mostly small-scale, domestic
and foreign competitiveness is weak; outdated technology, lack of management
experience; human resources lack skills and experience; low risk tolerance, poor
resilience to macroeconomic changes. Enterprises do not have links with each other and
link with large enterprises to create a competitive value chain in the region.

Most small and medium enterprises have private management and governance methods
,they do not have a long-term business vision and strategy. Limited governance capacity
is also the reason why SMEs have difficulty finding and building up business plans and
feasible investment opportunities, and lack of understanding of regulations when
approaching loans.

- In terms of collateral, small and medium enterprises themselves have many potential
risks because their assets are of low value, cash flow is not abundant, credit history and
credit rating with banks are not high. Therefore, besides the appraisal of business plans,
banks tend to require collateral; While financial capacity is limited, enterprises do not
have enough collateral to mortgage for banks.

- The transparency of accounting data, financial and accounting information is not up to

the standard, information is not transparent because small and medium enterprises do not
attach importance to building this data system, financial statements. Most have no audit,
limited accuracy.

About banks:
- In the process of lending to small and medium enterprises, due to the characteristics of
small and medium-sized enterprises that have a short establishment time or business life
cycle, there is a lack of stability in business operations, lack of transparency of
information provided to them. It makes it difficult for banks to evaluate the effectiveness
of a loan plan, as well as to evaluate the reputation of customers to make lending
decisions.

- Small and medium enterprises have difficulty in meeting conditions related to collateral
according to the general regulations of the banking system.

- In the context that small and medium enterprises still have limited information on
accessing bank loans as well as the capacity to prepare loan applications, the current
commercial banks' loan process and procedures are still quite complicated for small and
medium enterprises.

4.2. Competition in interest rate among commercial banks

The growth of the disproportion between credit and working capital puts pressure on the
liquidity as well as the interest rate level of the market. At the same time, the rapid
growth of credit also has potential risks for the banking system when the scale growth is
not accompanied by the improvement of risk management efficiency and the quality of
credit loans, especially in in the case that the bank's capital source does not focus on
production and business areas but instead turns to potentially risky areas such as real
estate.

The results of analyzing the structure of deposits from customers at 30 commercial banks
showed that, by December 31, 2018, the average short-term working capital rate of banks
accounted for 85.3% of the total size of customer deposits. Meanwhile, the ratio of
medium and long-term deposits, although improved in the period 2013-2018, remained
low (11.4%), making it difficult for commercial banks to manage their capital. , difficult
to balance terms.

Because mobilizing0 medium and long-term capital is not enough to finance medium and
long-term credit activities, banks are forced to transfer a part of short-term capital to meet
long-term demand. The proportion of medium and long-term capital is too low,
imbalance in the total working capital, the current imbalance in terms of capital is also
one of the reasons that many banks cannot meet the demand. loans from enterprises,
especially small and medium enterprises, because these enterprises mainly borrow
medium and long-term capital to invest in expanding production and business, or for
some large banks, the situation is This also makes it difficult for them to finance projects
of national stature.

In addition, the process of risk control related to receiving and depositing money at some
banks did not comply with the regulations of the State Bank, leading to a number of cases
related to customers' deposits in Bank. In the context of foreign credit institutions and
banks expanding operations in the Vietnamese market according to the roadmap of
implementing Vietnam's economic integration commitments, the level of competition in
the market will be increasingly fierce. If Vietnamese commercial banks do not strengthen
internal controls, creating confidence for customers, it will lead to the risk of a decrease
in market share and working capital scale.

II. Solutions (Khanh + Nam + Hải)

5.1
About business:

Firstly, they have to overcome shortcomings in order to build brand name and firm belief
in businesses. In terms of policies and guidelines, improving access to capital for
businesses is the task and responsibility of the management agencies in creating a
favorable and supporting business environment for business development. These are
favorable conditions to improve enterprises' ability to access capital. However, businesses
need to be proactive and accept the market discipline. Management solutions are just to
support businesses. Effective operation and trust building, prestige and strong brand name
are developed by each enterprise and depends on the enterprise itself. SMEs in particular
need to pay attention to innovating, improving management skills and competitiveness by
organizing professional operations, financial transparency, and effective operation. These
factors are well formed and developed, which will contribute to the development of bank-
customer credit relationships, and improve the credit accessibility of SMEs.

Secondly, SMEs need to enhance the innovation of management methods and production
methods. In the context of extensive integration and the impact of the Industrial
Revolution 4.0, small and medium enterprises need to be proactive and determined to
renew their management methods, production organization methods, and overcome the
limitations in private family model management in most small and micro enterprises;
actively innovate and apply advanced technologies in production in order to improve
operational efficiency, labor productivity, and create quality products and prices to
improve competitiveness in the market.

About banks:

Firstly, commercial banks need to develop capital mobilization policies in accordance

with the State's policies and mechanisms, in line with market developments, customer
needs and business strategy orientations of banks. Implementing a flexible interest rate
management mechanism and creating autonomy for the bank's branches are also needed.
Moreover, they have to research the mobilization capital market to come up with a
flexible and attractive deposit rate policy to customers, in accordance with market interest
rate developments in each period ... Besides, to reduce costs and create proactivity in
business activities, commercial banks need to research to come up with specific capital
mobilization products for each industry. Making the most of cheap capital, long-term use
of financial institutions, international organizations for the SMEs. Strengthen cooperation
with domestic and foreign financial institutions and institutions to exploit domestic and
foreign currency sources in the medium and long term.

Second, banks have to carry out market research of customer segmentation to offer
capital mobilization products suitable for deposit customers, about their characteristics of
regions and develop preferential interest rates policies. Promotions suitable for each
customer segment is also needed, while diversifying and perfecting the system of capital
mobilization products, increase utility for capital mobilization products and cross-sell
products.

Thirdly, commercial banks need to review the process, procedures, and transaction
documents related to programs in savings deposit transactions in order to complete the
process of savings deposit transactions, the program of warning and monitoring on the
system on deposit transactions and raising capital. Moreover, they have to pay special
attention to the content of checking and controlling. Strictly controlling internal processes
and regulations related to the receipt and deposit of customers are skeptical while
minimizing operational risks in the system.
Lastly, organizing well the program connecting businesses and banks. It is necessary to
continue organizing the banking - business connection program with a broader approach,
connecting not only to meet capital needs, solving business difficulties but also
connecting development and expanding use of other banking services.

5.2

Firstly, commercial banks need to develop working capital policies in accordance with
the State's mechanism and policies, in line with market developments, customer needs
and business strategy orientations of banks.

In addition, implementing a flexible interest rate management mechanism, creating

autonomy for the bank's branches. Researching the working capital market to come up
with a flexible and flexible policy on working capital interest rates to attract customers, in
accordance with market interest rate developments in each period ...

Second, in order to reduce costs and create initiative in business activities, commercial
banks need to research to come up with specific working capital products for each
industry.

For capital sources in urban areas and highly competitive regions, it is necessary to study
to come up with appropriate working capital policies. Make the most of cheap capital,
long-term use of financial institutions, international organizations. Strengthen
cooperation with domestic and foreign financial institutions and institutions to exploit
domestic and foreign currency sources in the medium and long term.

Third, conducting market research, customer segmentation offers working capital

products suitable for customers who deposit money, characteristics of regions and
regions, building preferential policies on interest rates, promotions suitable for each
customer segment; diversify and perfect the system of working capital products, increase
utility for capital mobilization products, cross-sell products ...

Fourth, commercial banks need to review the process, procedures, transaction documents,
and related programs in savings deposit transactions. Completing the savings deposit
transaction process; warning program; monitoring on the system of deposit transactions,
working capital ...