Group 3

Topic: Deposit products and prices of selected commercial banks in

Vietnam: figures and issues

Table of Contents
I. Overview..............................................................................................................................2
II. The significance of deposits.................................................................................................2
III. Deposit mobilization instruments.......................................................................................3
1. Interest rate.................................................................................................................................3
2. Deposit Products..........................................................................................................................4
3. Marketing....................................................................................................................................6
4. Promotions.................................................................................................................................9
5. Technology.................................................................................................................................12
6. Network.....................................................................................................................................13
7. Human resources.......................................................................................................................14
IV. Deposit mobilization result...............................................................................................14
1. Deposits from other credit institutions.......................................................................................14
2. Deposits from customers............................................................................................................15
V. Opportunities and challenges of commercial banks in deposit mobilization in Vietnam.....18
1. Opportunities.............................................................................................................................18
2. Challenges..................................................................................................................................23
VI. Summary..........................................................................................................................27
I. Overview

General Information:
 The Military Commercial Joint Stock Bank (MB Bank) founded on November 4th, 1994,
is a joint stock commercial bank of Vietnam, an enterprise under the Ministry of National
Defense.
 Charter capital: As of December 31, 2021, MB Bank Charter capital reached VND
37,783 billion.
 Head office: Located at 21 Cat Linh, Dong Da district, Ha Noi.
 Vision: To be the most convenient bank.
 Mission: For the development of the country, for the sake of customers.
 Core values: Solidarity - Discipline - Dedication - Execution - Trust - Efficiency.

II. The significance of deposits

Chart 1. PERCENTAGE OF DEPOSITS IN TOTAL LIABILITIES AND

OWNERS’ EQUITY

Source: MB Bank Balance sheet in 2021

We can see from the chart that deposits were the major and stable sources of funds since they
made up 65% in 2021 and 68% in 2020. Those numbers also suggest the importance of attracting
and controlling deposits to maintain funding for other activities.
 Table 1. DEPOSITS COMPONENTS
2021 2020
VND million % VND million %
Deposits from other credit
institutions 13,870,641 3.48 24,984,148 7.44
Deposits from customers 384,692,155 96.52 310,960,354 92.56
100.0
Total 398,562,796 0 335,944,502 100.00
Source: MB Balance sheet in 2021
The table demonstrates the components of deposits. And it can be seen from the table that
deposits from customers dominated the chart, accounting for more than 92% in both years.
Clearly, by volume, it’s no doubt that deposits are the bank's most important resource,
accounting for a large proportion of the total funds.
 Main source of funds for banking operations
unlike enterprises operating in normal production and business activities, the operation of a bank
has its own characteristics. If owner’s capital plays an important role in the establishment, after
going into operation, mobilized capital determines the scale of investment and lending, so it will
affect the bank's income. In particular, the capital mobilized from customers is the most frequent,
continuous, and stable source of capital, so it needs to be considered in the growth of commercial
banks. Moreover, deposits are hardly exposed to the ups and downs of the capital markets and
are the basic building blocks of a bank’s funding.
 Key factor to lending and other banking businesses
Deposits are the foundation for the prosperity and development of the bank, determining the
scale of operation and credit, the solvency and reputation of the bank. They have a great
influence on the expansion or contraction of their activities. With large capital, the bank will be
able to diversify its products to meet the increasing needs of customers like smart accumulated
savings or residential savings deposits. In addition, the bank may be able to expand the scope and
volume of loans not only in the domestic market but also in the international market. With a
greater share of deposit-based funding, MB Bank would at least be able to maintain, or perhaps
slightly expand, their lending volume with different borrowers at the same time. Besides large or
small capital, we cannot underestimate the role of capital stability. A bank with a stable capital
source will be easy in planning, providing investment and lending, and operating effectively.

III. Deposit mobilization instruments

1. Interest rate

We can see the table about MB Bank interest rates compared to other banks:
 Table 2. DEPOSIT INTEREST RATES OF MB BANK AND OTHER
BANKS RECORD IN DECEMBER 2021

Comparative Criteria MB bank Vietcombank BIDV

Term deposits interest 3.2% to 6.4%/year 3.0% to 5.3%/year 3.4% to 5.5%/year

rates (1-month to more
than 12-month)

Demand deposits 0.1%/year 0.1%/year 0.1%/year

interest rates

Interest rate was one of the important deposit mobilization instruments of MB bank. It can
be seen that the term deposits interest rates of MB bank were quite attractive compared to state-
owned banks like Vietcombank or BIDV. Unlike these banks, MB was not much under the strict
interest rate management of the State Bank of Vietnam, so the bank could set higher deposit
interest rates, together with reputation from operations that helped mobilize deposits from
customers.

2. Deposit Products

The savings products at MB bank were considered to be the most diverse compared to other
banks when MB bank offered 10 products to meet demands of all customers. Some of the
outstanding deposit products can be mentioned as:
 Flexible Medium-term and Long-term Savings
This product is for customers with some idle money and do not intend to invest in any other
purpose for a long time. With the "Flexible Medium-term and Long-term Savings" product of
MB, the deposit amount will be secured and make more and more profit.
o Tenors: 12 months and 24 months.
o Interest rate of this product is based on Interest rates of "Flexible Medium-term and
Long-term Savings" corresponding to deposit amount published by MB at the time
the savings book is opened.
o Interest rate is fixed during deposit term and flexible based on deposit balance under
the regulations of MB from time to time.
In case of early settlement of the whole principal, non-term interest rate will be applied.
In case deposit is due, interest will be automatically included in principal and a new
deposit term equivalent to original deposit term will be renewed.
In case of withdrawal before maturity, non-term interest rate will be applied.
 Digital savings
 Digital deposit, also known as an online savings product - customers can actively open an
online account by registering to eMB Plus and then deposit money easily.
o Tenors: 1, 2, 3 weeks, 1, 3, 6, 9, 12 months.
o Unlimited number of accounts at the same time.
o Interest rate is fixed or accumulated during the period.
o The minimum for each deposit is VND 1,000,000.
o In particular, the additional interest rate is more than at least 0.2%/year compared to
traditional savings; customers actively open accounts, settle accounts through internet
banking without going to transaction counters; open and close accounts 24/7, all days
of the week.
 Non-term Savings
This product is suitable for those who have small savings and need to be flexible in
withdrawing for personal spending. With Non-term Savings, you do not need to register the tenor
and you can withdraw money anytime depending on your demand.
o Interest: Non-term.
o Partially or wholly withdraw money anytime.
o Not used for issuing cheque books or ATM cards.
o Can be mortgage or guarantee for loans at MB. However, Non-Term Savings books
are not used to make payments, that means you can not deduct money from Non-
Term Savings to transfer to loan accounts or credit card accounts. You must partially
or wholly withdraw money from Non-term Savings to pay for your loans or credit
card statements.
 Military personnel savings deposits
Not all the banks have this kind of deposits, only a few banks like MB, Bac A Bank,... have
these specific deposits. MB designed this product for customers who are military personnel and
working in military units or at enterprises under the Ministry of National Defense. To open a
passbook for this kind of savings, customers need to provide these papers:
o Identification card/military personnel identification card.
o Registration form.
o Insurance claim file.
And the terms of these deposits are diverse, 6-month, 9-month, 12-month, or 24-month. This
product also allows customers to deposit additional funds 30 days before the due date and the
minimum for each deposit is only VND 500,000. Customers can make transactions directly at
MB's branches or transaction offices, or transfer savings via ATM or via mobile banking
services; Bank Plus and MB Plus or eMB online banking, etc, making it easier for customers to
deposit their savings anytime, anywhere.
 Savings deposit package for financial accumulation for children
To create a foundation for future generations, MB Bank offered the service package "My
beloved family". Each month, customers can deposit VND 1 million or more in the passbook for
each of their children. The full amount of the deposit will be in the possession of the child when
he reaches the age of 15. The registration process is simple, only the husband and wife’s
identification cards, marriage certificate, and birth certificate of the child are required.
 Truong An Savings
Truong An Savings is a savings product aiming at customers who are in the group of 50
years or older, helping customers to proactively reserve financial resources for the future, both
safely and passively with attractive interest rates. The highlight of the product is to get a special
offer from the bank as customers get free personal accident insurance provided by the Military
Insurance Company.
 Smart cumulative savings
This is the latest promotional product launched by MB. One of the highlights of this product
is the attractive interest rate. Along with the similar feature of the accumulated savings product,
which is a completely floating interest rate according to the market, the interest rate of MB's
"Smart Savings" product is gradually adjusted according to the outstanding balance.
Accumulated deposit increases gradually on savings accounts corresponding to each deposit
term, the difference between progressive interest rates is small: from less than VND 10 million,
from VND 10 million to 20 million.... to over VND 50 million, allowing customers to optimize
profits on each cumulative amount gradually.

3. Marketing

MB Bank's marketing strategy has been evaluated to help the bank stand firm and be a new name
in this financial sector.
 Brand identity renewal
In 2019, MB Bank officially changed a series of new brand platforms at 300 transaction
points throughout the system and this is also the 25th anniversary of the bank's establishment.
Accordingly, the General Director of MB Bank said that the bank has a solid foundation and has
taken bold and ambitious steps in the period 2017-2019 to transform into a comprehensive digital
bank with customers as center. “On that journey of strategic transformation, a new identity is a
necessary step to make a difference for MB, bring MB closer to customers and go further in the
future", he affirmed.
Besides that, MB Bank's new logo aims to represent the bank's mission of becoming a
smart, digital, and professional bank:
o The star in the new logo is changed and assembled from 10 clusters of red blocks
tilted together, showing the constant movement and innovation of the brand with the
desire to serve customers in the best way.
o The word MB also brings simplicity but still full of name meaning as well as solidity
to the brand of Military Bank.
 Picture 1: MB Bank's new logo

 Strong communication strategy to build a name

It can be seen that in the course of its operation, MBBank's marketing strategy has been very
active in conducting communication activities. The promotion of brand advertising, advertising
programs on mass media, etc has been widely applied, creating a premise for MBBank to
achieve certain results.
First of all, regarding advertising, MBBank has carried out advertising in many forms such
as newspapers, magazines, television, radio, email marketing, social media, etc. Because each
form reaches different customers, MBBank often applies multiple advertising methods
simultaneously to attract the target customers of MBBank.
For example: In 2019, to promote the slogan called “Bạn cần vay hay gửi? Đến MB đều có
quà”, MB Bank had carried out an advertising campaign on cars in Hanoi and Ho Chi Minh City,
both of which are big cities in Vietnam with heavy traffic, and frequent traffic jams definitely.
The source of cars for the 100% campaign is service vehicles like Grabcar, Beecar,..., which
often operate all day and move around the street to pick up and drop off customers. Therefore,
pedestrians had a lot of time to observe these banner ads. Just by depositing or borrowing money
at MB, customers can receive meaningful gifts for themselves and their families, with extremely
simple procedures.
 Picture 2: An advertising campaign on cars of MB Bank

Source: Bao Thanh Nien

Picture 3: The campaign “Bạn cần vay hay gửi? Đến MB đều có quà”

Source: Bao Thanh Nien

 Regarding sponsorship activities, MB has participated in many social and charitable
programs and left a mark on the public about an effective business bank and has also
continuously contributed to the community and society. Notable programs include:
- The donation program of MB Gold Heart Fund to support charity and social activities.
- MB sponsored the publication of the Legend of Truong Son and attended the incense offering
ceremony.
- MB has coordinated with the Red Cross Central Committee to organize 4 free medical
examinations for poor patients. Supporting flood victims in 3 provinces: Thanh Hoa, Nghe An
and Ha Tinh.
- MB also sponsored and participated in the Terry Fox Run to support cancer research funds and
people with disabilities and compatriots in the Central region.
The time of advertising is also focused on holidays, New Year, the anniversary of the
bank establishment or the opening of the new branch, ... Every year, MB spends a considerable
amount of money to carry out advertisements on the means: television, radio, internet,
newspapers, magazines, etc. This work helps customers better understand the bank, about the
products that MB Bank is providing or will provide, enhance the image and reputation.
→ MB Bank's marketing strategy targets strong communication activities and it can be said that
the bank is strategically aiming to shape and deepen its brand public.

4. Promotions

MB Bank has been offering a fee waiver policy, launching a series of attractive affiliate
promotions to encourage card opening and open online payment accounts.
 Demand deposit
MB bank is a pioneer bank in this campaign. Users only need to download the MB Bank
application, open an account. Account holders can get at least VND 30,000 and the client's
introducer will get 50,000 for each referral of a registered customer. Moreover, each customer
when reaching a milestone of successful referrals 3 - 5 - 15 will continue to receive more money
into the account with the corresponding levels of VND 50,000, VND 100,000, VND 150,000.
In addition, the bank also provides the service of opening a beautiful account number.
Customers can easily choose a personal preference digital account number (four quarters, five
quarters, fortune-telling, number of gods, number by date of birth, number by phone,date of
birth, or anniversary as having a special meaning for the account holder....). All of it is free. If in
the past having a personal preference account number was only for VIP customers, corporate
customers or high-income customers, now everyone has the opportunity to own it.
There is no minimum balance required to maintain an account, free money transfer in the
bank, 24/7 interbank free lifetime, update your balance regularly, free of charge when
withdrawing money at ATMs, cardholders can trade at more than 5,000 ATMs of banks in
strategic alliances and ATMs of strategic partners,...Not only that, customers can also access
banking services through the website instead of having to go directly to the bank like registering
online cards,online personal loan registration ... To facilitate the use of banking services, MB
provides-banking services with a variety of facilities to choose from. With e-banking services of
MB Internet banking, Home Banking, Mobile Banking, Contact Center, Billing Payment,you can
query account information and other banking information at any time of the day not to MB
Bank's transaction points
→ All of those help to increase the number of customers. Since then, the large individual
customer base will help the bank increase the size of its customers as well as increase the amount
of demand deposits (CASA) which has the lowest interest rate, usually only 0.1% / year and
promotes cross-selling of products such as insurance, bonds and other banking services. Besides,
instead of spending more time and effort than in the traditional transaction channel at the counter
which is also a form of cost and benefit, thereby contributing to the habit of cashless payment of
customers.
 MB was also associated with supermarkets, restaurants, carriers, airlines, big brands,... to
launch discount promotions, give vouchers or cashback shopping when paying online via
banking applications to attract customers.

Picture 4: Cashback shopping program

Source: MB Bank’s Facebook

 Term deposit
There are also some gratitude programs for customers with term deposits in holidays,New
Year, the anniversary of the bank establishment,....For instance, on the occasion of 25 years of its
establishment, MB launches the program "Gắn kết hôm nay,tặng ngay lãi suất " for individual
customers who deposit new savings. at any MB transaction point nationwide, with an additional
preferential interest rate of up to 0.3% as a gift to express gratitude to customers who have
accompanied MB during the past time.
All individual customers deposit new savings at MB's transaction points during this time for
VND traditional savings products with term including: Interest Savings Postpaid, Monthly
Interest Payments , interest paid in advance, will enjoy additional preferential interest rates
(applicable to deposits with a minimum deposit term of 1 month, the minimum deposit amount is
VND 300 million).Specifically as follows:
 For 01-month term: offer an additional 0.2% preferential interest rate for new savings
customers; 0.1% extra bonus for old customers MB has a new deposit.
 For a term of 07 months: an additional 0.3% preferential interest rate for new savings
customers; Get an extra 0.2% for old MB customers who have a new deposit.
 For a 13-month term: an additional 0.3% preferential interest rate for new savings
customers; Get an extra 0.2% for old MB customers who have a new deposit.
In addition, customers who join new savings accounts at MB also enjoy other free offers:
Picture 5: “Gắn kết hôm nay, tặng ngay lãi suất” program

Source: MB Bank’s Facebook

5. Technology

With the development trend of digital banking, transactions are mostly performed on
smartphones, so choosing a bank with a modern technology system is always a priority. Since
2017, MB had chosen a new direction, which was to transform its operations to a digital platform
MB Bank is also one of the banks that invests in technology for digital banking products.It has
created a series of new platforms such as the MBBank App, the BizMB App, SmartRM, and
Smart CRM, providing outstanding digital experiences for its customers. Through these digital
platforms, businesses in a variety of fields can provide their essential products and services to
customers.
In 2020-2021, rather than going to physical offices to pay their electricity, water, and phone
bills, or education and healthcare fees, as they had to in the past, customers now can conduct
payments quickly and conveniently on their mobile through the MBBank App, which is
harnessing the power of the latest Fourth Industrial Revolution technologies. Thanks to the
power of AI, the MBBank App uses Electronic Know Your Customer (eKYC) technology to
verify that a customer’s identity matches their ID card, which ensures that opening an online
bank account with the MBBank App is much easier and safer.
As a result of these pioneering steps in the digital sphere, MBBank made a major
breakthrough in 2020 and 2021.The number of individual customers of MB was 2.6 times and 3
times higher than the previous year, respectively.
A MBBank report showed that in 2020, MBBank attracted two million more customers. Its
transaction rate grew three-fold, reaching 90 million electronic transactions. More than 84 per
cent of the transactions were conducted via digital channels. In 2021, the MBBank App recorded
about 6.3 million new users, accumulating 9.5 million users, an increase of 320% compared to
2020. "Up to now, transactions on digital channels at MB account for about 92%. The proportion
of digital transactions ranks among the top in Asia. We are constantly improving the digital
ecosystem, aiming to gradually provide customers with a digital banking experience 4.0, leading
in digitalisation" – representative MB representative said. And this number is expected to
increase even more in the near future.
MBBank also recognised the potential for the digital transformation to have a positive
impact on humanitarian work. As part of its participation in Vietnam’s National Digital
Transformation Program 2020 - 2025, MBBank has been shifting charity work from the
traditional to digital sphere through iNhandao, a government-level digital humanitarian platform
in coordination with the Vietnam Red Cross and Vietnam’s Post Office.
With a modern, convenient and easy-to-access approach, this platform offers a transparent
method for people to help those most in need, whose addresses are made available on the
platform after being checked and verified by the Vietnam Red Cross. Money donations and the
payment of goods designated for those in need can then be made online and delivered to
beneficiaries through the Post Office’s Smart Logistics system.
In 2022, MB carried out a comprehensive digital transformation, creating breakthrough
growth in the digital banking business. MB focuses on developing the customer ecosystem on
two platforms: App MBBank (for individual customers) and BIZ MBBank (for corporate
customers), thereby, accumulated to attract nearly 20 million customers, increasing 54%
compared to 2021. The proportion of transactions made through digital channels remained high,
reaching 95%.
Besides, MB pioneered in deploying the Mini-App platform in the banking sector,
enhancing customer experience with the Apps-in-App model. The Wealth Management financial
investment platform on the MBBank App was honored at the Vietnam Digital Transformation
Awards - Vietnam Digital Awards in 2022, which is a testament to the bank's initial success in
Apps-in-App deployment.
2022 is also an important milestone for MB when the bank completes two major upgrading
projects of the whole system. The highlight is the successful upgrade of the T24 system, ready
infrastructure to serve 30 million customers.
→ With a strong technological and financial foundation, MB has overcome the challenge of
the COVID-19 pandemic spectacularly while continuously growing in efficiency and all
activities in recent years. This is a "golden" opportunity for businesses that are preparing a
modern technology platform such as MB to accelerate and strongly deploy digital strategies, not
only internally but also to connect and support a multi-million customer ecosystem. Besides, in
2023, MB aims to reach 28 million customers by 2023 and increase labor productivity, aiming
for the top position in the market through the process of promoting digitization, automating
operations and optimizing processes.
→ In summary, the promotion of online payments brings benefits to many sides. Customers can
enjoy promotions, perform transactions quickly, reduce time costs, limit risks of counterfeit
money... The bank also benefits greatly when it has the potential to increase customer numbers
quickly, thereby promoting the provision of cross-selling products and services, selling more to
customers, as well as saving facilities costs, transaction operating costs at the counter.

6. Network

MB Bank had a nationwide network of branches and transaction offices. In December 2021,
MB Bank had 296 transaction points, amongst that, the North had 148 points, the Central had 40
points and the South had 108 points.
Although this number was far lower than the oldest banks (Agribank with more than 2,000
points and BIDV with more than 1,000 points), it was still among the top banks having dense
networks.
MBBank set up points of transaction in densely populated places to not only bring about
convenience to the customers but also increase the bank’s recognition and build customers' trust,
thereby mobilizing more deposits.
Each of MBBank's branches has two areas:
 The auto banking area operates 24/24 hours, where the ATMs have the function of an
automatic bank such as withdrawing money, transferring money, viewing account
statements, and depositing money, etc. For ex: there is an MB smartbank on the ground
floor of NEU building.
 The transaction area that has consultants operates during office hours. These counters are
designed to be friendly, with no glass between customers and employees, creating a sense
of closeness and trust for customers.
 Besides, MB Bank had two branches in Laos and Cambodia and one representative office in
Moscow, Russia, showing that MB Bank is not only developing the domestic market but also
searching for capital sources from foreign countries.

7. Human resources

The average age of MB employees was 31, of which the 9X generation (accounting for
59%) and 8X (accounting for 35%). It can be seen that MBBank has a great attraction to the
young labor force, which is suitable for the technological development of the bank.
MB Bank prioritizes human resources with high technology and banking knowledge. The
technology experts and personnel accounted for more than 9% of the total staff of MB bank
(about 1,500 over 15,910 staff in 2021).
To catch up with technology development as well as enhance customer experience, MB
Bank constantly trains high-tech personnel. The bank determined technology personnel would
become the main force to support MBBank to expand its scale and operate as a technology
enterprise.
The Innovation Lab at MBBank is considered a space for employees to propose, test and
build new business models and solutions without being constrained or limited in creativity. It is a
place to connect, improve capacity, and re-train departments in the bank through open
discussions on topics, from the foundational content of the flexible working model such as Agile,
First Principle Thinking, and Design Thinking to more in-depth topics with each department. In
2021, MB was honored as "Best Workplaces in Asia" by HR Asia magazine and completed the
development of a standard competency framework for positions.
The difference in operation following MBBank's Agile model is the "reverse process". In
MBBank's digital transformation strategy, they focus on practical values by putting customers at
the heart of all banking activities. MBBank's processes or product services are developed from
customers’ actual experiences, meeting their needs and desires. "Reverse process" helps
MBBank shorten research and development time, continuously offer new solutions to catch up
with consumer trends in the digital age; while optimizing the working efficiency of the personnel
apparatus. MBBank's success is demonstrated in the growth rate of digital banking in recent
years - the customer experience is increasingly comprehensively improved.
Clearly, taking technology personnel as the core is the leverage to help MBBank
synchronously transform the entire banking system. This promises to bring MBBank to a
breakthrough on the digital transformation roadmap, reaching the goal of becoming a leading
technology enterprise in the near future.

IV. Deposit mobilization result

1. Deposits from other credit institutions

 Table 3. DEPOSITS FROM OTHER CREDIT INSTITUTIONS

2021 2020
VND million % VND million %
Demand deposits 192,906 1.39 606,184 2.43
In VND 146,548 1.06 572,481 2.30
In foreign currencies 46,358 0.33 33,703 0.13
Term deposits 13,677,735 98.61 24,377,964 97.57
In VND 10,305,931 74.30 17,150,702 68.64
In foreign currencies 3,371,804 24.31 7,227,262 28.93
Total 13,870,641 100.00 24,984,148 100.00
(Source: Military Commercial Joint Stock Bank notes to the financial statements, section 21)
The table shows data about deposits from other credit institutions in MB in 2020 and 2021.
It can be seen that total deposits from other credit institutions witnessed a significant decrease.
Specifically, demand deposits of other credit institutions in VND showed a downward trend
while that in foreign currencies saw a slight rise. In contrast, the term deposits in both VND and
foreign currencies declined sharply. And it was the fall of term deposits from other credit
institutions that caused the nearly 50% drop of the total deposits from other credit institutions in
2021 as term deposits in VND and in foreign currencies were items that took up a large
proportion for total deposits, accounting for more than 95% in both years.

2. Deposits from customers

Table 4. DEPOSITS FROM CUSTOMERS

2021 2020
VND million % VND million %
Demand deposits 171,396,096 44.55 115,194,453 37.04
In VND 157,468,700 40.93 97,975,293 31.51
In foreign currencies 13,927,396 3.62 17,219,160 5.53
Term deposits 197,179,579 51.26 183,647,782 59.06
In VND 192,331,233 50.00 179,173,089 57.62
 In foreign currencies 4,848,346 1.26 4,474,693 1.44
Deposits for specific purposes 4,388,708 1.14 5,049,715 1.62
In VND 2,850,634 0.28 4,524,750 1.45
In foreign currencies 1,538,074 0.11 524,965 0.17
Margin deposits 11,727,772 3.05 7,068,404 2.17
In VND 7,719,805 2.01 3,631,600 1.17
In foreign currencies 4,007,967 1.04 3,436,804 1.10
Total 384,692,155 100.00 310,960,354 100.00
(Source: Military Commercial Joint Stock Bank notes to the financial statements, section 22)
The table gives information about deposits from customers in MB in 2020 and 2021. As can
be seen from the table, the total deposits from customers in 2021 grew slightly compared to the
year 2020.
This growth was mostly concentrated in demand deposits and term deposits as both deposits
rose to VND 171,396,096 and VND 197,179,579 million, respectively. In particular, the demand
deposits grew by nearly 50% compared to 2020’s figure. This could be one of the effects of the
global pandemic. As we know, the global pandemic has required cities and provinces to practice
social distancing, which caused a significant decline in consumption and made transactions less
likely to be done physically. So people started to invest in deposits as there was an abundant
amount of money from fall of consumer spending and the demand for doing non-physical
banking activities increased.
On the contrary, the deposits for specific purposes decreased from VND 5,049,715 to VND
4,388,708 million. In addition, we can also see a sharp growth of margin deposits from 2020 to
2021. To make you understand more about this section, I want to give you the definition of
margin deposits. Margin deposit is an organization's demand or term deposit at a bank to ensure
the performance of an organization's financial obligation by that organization to the bank or
related parties.
The proportion of demand deposits witnessed an increase while that of term deposits saw the
opposite in spite of the growth in terms of quantity. Still, term deposits attracted customers most,
accounting for 51.26% of the total deposits from customers in 2021, followed by demand
deposits with 44.55%. Term deposits from customers were still the core and most stable sources
of deposits mobilization, accounting for a dominant proportion of MB's total deposits in both
years.
But it can be seen that the bank has started to shift the deposit structure. Although MB’s
term deposits from customers made up a high proportion in the deposits structure, the growth
rate was just approximately 7.37% in 2021, nearly 7 times lower than the growth rate of demand
deposits, which was 48.8% and 9 times lower than that of margin deposits.
 It seemed that in 2021 the bank gradually focused on attracting other deposits from
customers than term deposits, especially demand deposits as in the deposit structure, demand
deposit (CASA) was the cheapest source of funds and enhancing mobilization on this type of
deposit can optimize costs, improve cost-to-income ratio (CIR) and net profit margin (NIM).
With the social distancing promoted the trend of online payment and promoting digitization
policies of MB as well as technology development helped increase the proportion of CASA,
thereby reducing the capital cost for the bank. And we have the CASA ratio, so what is the
purpose of the CASA ratio? The CASA ratio indicates how much of a bank’s total networth from
deposits and issuing valuable papers are in both current, savings accounts and escrow accounts.
The CASA ratio indicates how efficient a bank's process is for obtaining funds at the lowest
available price. Current accounts usually pay little or no interest on cash held in them, while
ordinary savings accounts, particularly those offering instant access, generally pay meager rates
of interest. Thus the higher the CASA ratio, the better the bank is proving to be at accessing
funds at low cost. The CASA ratio of MB (49%) implied that the bank had a huge amount of
low-cost capital and it also showed that the bank offered good service quality; it was reflected in
the way MB invested in high technology, increased utilities and provided services to customers
to attract demand deposits.
And most of the deposits were deposited in local currency rather than foreign currencies.
Deposits in foreign currencies just made up a small percentage of the total deposits from
customers, ranging from 0.1% to no more than 6%. Foreign currency demand and term deposits
in 2021 accounted for less than 10% of total demand and term deposits as customers do not earn
interest from these deposits or earn just a small amount of interest (depending on the currency).
Table 5. INTEREST RATES FOR CUSTOMER DEPOSITS
2021 2020
Demand deposits in VND 0.10 – 0.20 0.10
Demand deposits in foreign currencies 0.00 0.00
Term deposits in VND 0.00 – 6.90 0.00 – 8.00
Term deposits in foreign currencies 0.00 0.00
(Source: Military Commercial Joint Stock Bank notes to the financial statements, section 22)
However, deposits for specific purposes and margin deposits in foreign currencies took up
more than 30% of total deposits for specific purposes and margin deposits, because the deposits
related to the operation of economic entities which use a large number of foreign currencies in
business activities.
As we can see from the table, most of the deposits from customers in foreign currencies in
2021 increased except for demand deposits, especially deposits for specific purposes when it
grew nearly 3 times higher than in 2020. This implied the rising demand for foreign currency
deposits from the customers.
 Table 6. ANALYSIS OF CUSTOMER DEPOSITS BY TYPES
2021 2020
VND million % VND million %
Economic entities 183,157,168 47.61 164,756,442 52.98
Individuals 201,534,987 52.39 146,203,912 47.02
Total 384,692,155 100.00 310,960,354 100.00
(Military Commercial Joint Stock Bank notes to the financial statements, section 22)
The table shows data about deposits by types of customers in MB in 2020 and 2021. It is
noticeable that both deposits from customers as economic entities and individuals saw an
increase in 2021. In 2020, MB attracted more deposits from economic entities than from
customers as individuals, that explained why business entities deposits accounted for a larger
proportion in deposits from customers, 52.98% compared to 47.02% of total deposits, but in
2021, the amount of deposits mobilized from customers as individuals surpassed the deposits of
economic entities, accounted for 52.39% of total deposits. Specifically, deposits from individuals
grew by 37.85% in 2021, 3 times higher than the growth rate of deposits mobilized from
business entities. This indicated that MB focused more on mobilizing deposits from individual
customers in 2021.

V. Opportunities and challenges of commercial banks in deposit mobilization in

Vietnam

1. Opportunities

1.1. High savings rate of the population

 In the world:
Among the countries and territories with comparative data (Statistical Yearbook 2021), there
are only 16 countries and territories with a cumulative asset/GDP ratio higher than 30%, of
which Africa has 4/19, Asia has 9/24, Europe has 3/35, America, Australia has none. Vietnam is
3rd/9th highest in Southeast Asia, 5th/34th in Asia, 8th/109th in the world - which is quite high.
This rate of Vietnam in recent years is shown in Figure 1.
 Picture 6: The average savings-to-GDP ratio of Vietnam

 In Viet Nam:
The average savings-to-GDP ratio of Vietnam in the period from 2016 to 2020 is about
29.27%. In 2021, due to the severe impact of the global epidemic, bank deposits of corporate and
institutional customers were more than individual customers for the first time. The Covid-19
pandemic severely eroded people's lives, so their remaining money was very small. A high rate
of accumulation of assets shows thrifty in consumption, when the consumption/GDP ratio tends
to decrease in recent years (from 70% in 2015 to 65.4% in 2020 and to 65% in 2021).

However, from the beginning of 2022, the banking system received an additional VND
103,000 billion from the population (equivalent to an increase of 1.95% compared to 2021). In
2022, accumulated assets increased by 5.75%, contributing 22.59% to GDP.

Picture 7: Gross domestic savings (% of GDP) in Vietnam

Gross domestic savings (% of GDP) in Vietnam was reported at 34.95 % in 2021, according to
the World Bank collection of development indicators, compiled from officially recognized
sources.
According to a report by Nielsen, a global market research company, Vietnamese consumers
were among the most avid savers in the world in 2020. The report found that Vietnamese
consumers saved 31% of their income on average, making them the second-most avid savers
globally, behind only consumers in India who saved 32%.

Picture 8: Survey regarding saving amount of Vietnam

There are several factors that contribute to Vietnamese consumers' high savings rate. One is
the culture of saving in Vietnam, which has been passed down through generations. Vietnamese
people often prioritize saving for the future and for unexpected expenses, rather than spending on
luxury goods or entertainment.

Additionally, the relatively low cost of living in Vietnam means that people are able to save
a higher proportion of their income compared to other countries. However, it is worth noting that
while Vietnamese consumers may be avid savers, this doesn't necessarily mean they have high
levels of disposable income. Many people in Vietnam still struggle to make ends meet and may
have limited opportunities for financial advancement.

1.2. Control inflation

According to a study by the International Monetary Fund (IMF), a 1 percentage point
increase in the benchmark interest rate can reduce inflation by up to 1 percentage point.
However, it may take 2-4 years to achieve maximum effectiveness.
To prevent high inflation and bring it closer to the target level, in 2022, the US Federal
Reserve raised interest rates 7 times in a row at the fastest pace since 1980, bringing the federal
funds rate from near 0% in March 2022 to 4.25-4.5%, the highest level since January 2008.
According to the General Statistics Office, the consumer price index (CPI) in September
2022 increased by 0.4% compared to the previous month. Compared to December 2021, the
September 2022 CPI increased by 4.01% and compared to the same period last year increased by
3.94%.

Picture 9: CPI from 3/2022 to 3/2023

Source: State Bank of Vietnam (SBV)

According to the State Bank of Vietnam (SBV), the primary and consistent objective of the
SBV in conducting monetary policy is to prioritize inflation control, maintain macroeconomic
stability, ensure the safety of the banking system, and support economic recovery. Therefore,
adjusting and increasing interest rates is a timely solution that is in line with the general trend
worldwide to achieve this goal. In fact, when the deposit interest rate is raised, it helps to
maintain a positive real interest rate. In the simplest terms, the real interest rate can be
understood as the interest rate that compensates for the currency's depreciation and has some real
interest at a certain level. In other words, the bank deposit interest rate must be higher than the
inflation rate.
As of the end of November 2022 compared to the beginning of the year, the total deposits of the
entire banking system increased by 5.5%, of which the growth rate of household deposits was
8.38% while the deposits of organizations only increased by 2.9%.
With pressure to maintain liquidity for credit institutions and the economy, the State Bank
adjusted the operating interest rate twice in September and October 2022. This was consistent
with the general trend of the world economy when inflation was high, prolonged and showed no
sign of stopping. As the US Federal Reserve (Fed) increased interest rates sharply, causing
domestic currencies to depreciate.
If at the same time in 2021, only a small number of banks mobilized with savings interest
rate above 7%/year, in 2022, there were banks that have mobilized deposits with interest rate
over 10%/year with attached conditions and more than half of the banks in the system listed the
interest rate above 8%/year.

Picture 10: Interest rate of several commercial banks in 2022

With attractive interest rates, this is an advantage for banks to attract savings deposits.

1.3. Savings interest is not subject to personal income tax

For enterprises, according to Article 7 of Circular 78/2014/TT-BTC as amended and
supplemented according to Article 5 of Circular 96/2015/TT-BTC, interest on bank deposits
belongs to other taxable incomes. Corporate income tax. However, currently, individuals who
deposit savings in banks will not be subject to personal income tax. This is regulated in Article 2
of Circular 111/2013/TT-BTC Guiding the Law on Personal Income Tax and Decree
65/2013/ND-CP issued by the Minister of Finance.
The state regulates that individuals do not have to pay taxes because they want to
encourage the circulation of money in the market. In addition, this is also an important capital
mobilization channel of the economy.
Therefore, this is also a favorable factor for promoting deposits of commercial banks.

1.4. The volatile market makes people choose savings instead of investment
In the context of investment channels such as real estate, securities,..etc. There are many
fluctuations and instability, along with high deposit rates of banks, which are considered the
main reasons for the high increase in residential deposits in 2022.
With the securities market, 2022 has been an unforgettable year. As for the stock market,
closing the year after the boom in 2020 - 2021, the VN-Index, which represents the Ho Chi Minh
Stock Exchange (HoSE), was one of the world’s four indices with the largest losses, stood at
1,007.09 points, losing more than 491 points, or 32.78% from the end of last year after recorded
nine months of decline and only three months of gain and red overwhelmed the entire stock
market. In addition, the market was also heavily affected by stock market manipulation cases
performed by former business leaders ( FLC group - Trinh Van Quyet; Louis Holdings - Do
Thanh Nhan,...) as it created insecurity for investors and decreased the market appeal. The bond
market was also in a similar situation as during 2018 - 2021, the corporate bond market soared,
the total issuance volume of corporate bonds reached about VND 643.5 trillion (USD 27.3
billion) in 2011 - 2018, according to VBMA data, while the amount was up to VND 658 trillion
just in 2021, with nearly VND 628 trillion being private offering bonds. But after the
development, the market was almost frozen. Data of December 16 from the VBMA showed that
the value of private issuance of corporate bonds in 2022 is only VND 244 trillion, which
accounted for about 96% of the total issued value but was down 60 per cent year-on-year. And
the issue of decree 65 (amendments decree 153), which became effective on September 16,
further tightened the conditions for issuing corporate bonds.
With the real estate market, the data of the Ministry of Construction shows that the supply of
commercial housing by the end of the third quarter of 2022 was only 17 projects with 4,123
units, equal to about 34% compared to the same period in 2021. It is worth noting that the supply
is only concentrated in the middle and high-end market, and the price is not suitable for most
people with actual demand. Therefore, the absorption rate has only significantly decreased by
over 33% compared to the first half of the year, and the trading volume has decreased by over
50% compared to the same period last year. The main reason was the difficulty in capital flow in
real estate, and the rise in interest rates caused investors to hesitate in investment decisions.

2. Challenges
2.1 The trend of reducing deposit interest rates after a period of increase makes
people hesitate to deposit
During what period did the deposit interest rate increase?
Figures: Looking at the tables of banks’ interest rate, it can be seen that, after more than 2 years
of being affected by the COVID-19 pandemic from mid-2022, deposit interest rates at banks
tended to increase slightly and exploded at the end of 2022 when deposit interest rates increased
on a large scale with a significant rise: it is estimated that the interest rate for 1-3 month term
increased by 0.9% on average in the past month, in some places it increased by 1.9%. Interest
rates for terms of 6 months or more also increased by an average of 0.35-0.4% compared to the
beginning of the previous month.
Reasons: The trend of increasing interest rates of commercial banks comes from the context of
Inflation in Vietnam (the central bank attracts money back). The deposit interest rate increased
partly because idle cash flowed into securities when the VN-Index peaked: in early 2022, the
VN-Index continuously reached historic peaks since its establishment at 1,528 points. make
many investors tend to withdraw their deposits at banks and invest in the stock market.

Picture 11: Average deposit interest rate

Source: Group 3
https://docs.google.com/spreadsheets/d/11gdtVIUEInJwMWP1siYrK8FXYepulgzASCDGNzdsxnU/edit?
usp=sharing

How did the deposit interest rate decrease?

Figures: Commercial banks decreased by 0.2 - 0.5% per year compared to the interest rates of
each bank from February 27, 2023 for the group of terms from 6 to 12 months.
Reasons for this drop in deposit interest rates:
  The country's situation is somewhat stable when inflation is under control: Inflation
has decreased in the first three months of the year, with CPI inflation compared to the
same period last year decreasing from 4.89% in January to 3.35% in March, with an
average of 4.18% for the first quarter.

Picture 11: Inflation in Vietnam 2022-2023

Source: Tradingeconomic.com

 After partially controlling inflation, the government's goal is to stimulate economic

development by opening up capital to flow into production and business:
The simultaneous reduction of interest rates by commercial banks will create positive
expectations for people, businesses and investors to promote production and business
development through bank loans.
According to forecasts, credit growth in the first 6 months may reach more than 6%
compared to the beginning of the year, quite low compared to the growth rate of 9.35% in the
first half of 2022 despite the government's efforts such as easing room for credit,... This shows
that businesses are still hesitant to borrow from banks to expand production and business.
=> Directly affects the growth target of the state.
Therefore, after the State Bank reduced the operating interest rate for the second time,
commercial banks also simultaneously reduced the deposit interest rate, costing less => reducing
the lending interest rate. This is also the state's effort to stimulate businesses to borrow capital to
develop.
(Explanation of credit room: If the credit room is not applied, credit growth is likely to exceed
the reserve capacity, capital balance and management capacity of commercial banks => the state
has controlled it since early, from growth and credit quality in the banking system. The credit
room set out also aims to help borrowers control their loans because the borrower also has a
certain loan limit, avoiding falling into inability to pay.
=> But they still don’t borrow.
=> If GDP is low, inflation is stable, it is reasonable to adjust monetary policy to stimulate
economy.
  The status of banks is stable when the liquidity is at a high level
This is demonstrated by two indicators:
o The balance of deposits of credit institutions at the State Bank according to the required reserve
is large, lasting from February and March, continuously exceeding the required reserve level.
o Interbank interest rates decrease very quickly => banks easily lend to each other with low
interest rates. (Interbank interest rates continued to fall deeply after the SBV decided to reduce
some types of operating interest rates by 1 percentage point from March 15. According to the
SBV, the average interbank lending interest rate in VND for overnight terms (main term accounts
for 90-95% of the transaction value) on March 22 fell to 1.55% from 2.7% on March 20. This is
the lowest overnight interest rate since the middle of August 2022 and is equivalent to the
"cheap money" period from the beginning of 2020 to the middle of 2022.

Results: How does the in deposit interest rate affect depositors' psychology?
It can be seen that commercial banks actively reduce interest rates for terms of 1 year or more.
These are interest rates that directly affect depositors' psychology. Instead of being able to enjoy
interest rates above 9% or higher for a 1-year term, people can only deposit interest rates below
8%, even around 7%/year. Falling savings interest rates have two main effects:
 (1) is to reduce the need of depositing money
 (2) increase the attractiveness of the securities investment channel compared to the
savings channel based on the basic valuation method.
Thus, the securities investment channel will become a "potential competitor" of deposit channels
at commercial banks. This was also verified after the SBV's decision to lower interest rates for
the second time, cash flow increased significantly on the stock market, pushing up liquidity. In
just 3 trading sessions after the decision to lower interest rates for the second time, the matching
liquidity on the two listed exchanges skyrocketed to an average of VND 13,700 billion/day,
which is an increase of 52% compared to the average level of VND 9,000 billion. VND/day
before.

2.2 Depositors' confidence was shaken because bank staff did not clearly explain the
difference between deposits and corporate or insurance bonds (SCB)
Fact: The fact that even the bank employee does not understand comprehensively the difference
between deposits and corporate bonds causes customers to make wrong decisions (buy junk
bonds, lose money, or even be exposed to insurance premium obligations).
Overview of the case: In the previous year, we have witnessed many cases where depositors,
after depositing at the bank, discovered that their money did not go to the deposit account but
instead was used to buy bonds or insurance policies. This comes from bank staff intentionally or
unintentionally misinterpreting the difference between deposit products and corporate bonds. In
which, a typical case can be mentioned at SCB.
At SCB at that time, many people after finishing their savings, were advised by the bank staff to
switch to a new product. Customers even said that they did not have access to any documents
related to corporate bonds, but only signed the payment authorization form, until nearly ten days
later they received a full document regarding the bond purchase contract. It shows that, recently,
many bank employees, including employees of SCB, offer bonds to investors, but are confused
between buying bonds and saving.
Depositors' reactions: Depositors' sentiment is generally bewildered. Despite the
announcements of the media and the reassurance measures of the state, people still rushed to
withdraw money ahead of time.
Impact of the incident: The incident at SCB and a number of similar banks (to a small or odd
extent) may cause people's concerns, depositors' confidence in the banking system to be shaken.
However, in Vietnam, the State always supports, so there is no bank that has carried out
bankruptcy procedures, even if some banks are on the verge of bankruptcy, the State Bank will
restructure and buy back with VND 0. This makes banks still a safe channel for people to deposit
money. After the SCB incident, people will tend to be more wary of deposit products advised at
banks and will tend to choose large and reputable banks.
=> Can basically affect small banks.

VI. Summary
We hope that through our presentation we can give you the insight about how important
deposits are to a bank, how the bank mobilizes them and the opportunities and challenges all the
banks have to face in deposit mobilization. From our analysis, we can conclude that deposits are
very important to banks and each bank has their own policies and utilizes different instruments
effectively to mobilize deposits. And each bank has to make the right decisions and perform
necessary operations to take advantage of the opportunities and face the challenges from the
market.