The overall value of time deposits in the commercial banking sector was Bt2.6 trillion as of June, up 35.4 per cent from the same period last year. Time deposits account for 60.4 per cent of total deposits, compared to 35.43 per cent in June last year, according to Bank of Thailand data.

In contrast, the overall value of savings deposits declined by 12.9 per cent year on year to Bt2.4 trillion in June.

The proportion of savings deposits relative to overall savings dropped to 36.2 per cent from 46.4 per cent over the year.

As this shift in deposits was taking place, the overall value of deposits at commercial banks increased 11.7 per cent to Bt5.27 trillion. However, this increase was primarily the result of new banks - Tisco, Kiatnakin, ACL, and Land & Houses Bank - upgrading their operations in the second half of last year. GE Money Retail Bank followed suit in the first half of this year.

Jada Wattanasiritham, president and CEO of Siam Commercial Bank (SCB), said recently she wanted depositors to shift their money into time-deposit accounts. Because these accounts carry a fixed rate, she said, the bank would know their maturity in advance, while depositors would earn higher interest rates.

Banks, SCB among them, have raised their fixed-deposit rates while keeping their savings-account rates unchanged in a bid to widen the spread between the two types of account, she said.

Most banks now offer a rate of 0.75 per cent for savings accounts and 3.5-5 per cent for time-deposit accounts. Thanachart Bank and Tisco Bank lead the pack with savings rates of 3-3.75 per cent.

"Savings accounts represent a high proportion of total deposits. They also carry very high costs because depositors withdraw money so often. Their proportion will gradually decline due to the widening spread between savings and time-deposit accounts," Jada said.

The deposit turnover ratio was up significantly to 2.84 times in March, when banks twice raised interest rates. The turnover ratio for time deposits was 0.22 times in March, compared with 0.15 in February, while the ratio for savings deposits was 2.48 times, compared to 1.77 in February.

KGI Securities said in a recent report that deposit shifts had raised the costs of small and medium-sized banks. Their fixed-deposit rates were 275-425 basis points higher than their savings rates.

The company estimates that Kasikornbank's savings and current accounts represent 55.1 per cent of its deposits, followed by Krung Thai Bank, with 54.5 per cent, and SCB, with 52.3 per cent.

The report found that the net interest margin (NIM) at the country's larger banks was 3.6 per cent in the second quarter, due to their lower funding costs. By contrast, the NIM at smaller banks was 2.5 per cent during the same period. The latest rate change will push up the NIM in the third and fourth quarters, said the report.

Banks have increased deposit rates six times this year, and eight times since last September.

The most recent increase came in August. The rate changes were in response to the central bank's signals on interest-rate hikes.

Jada said rates would soon peak and enter into equilibrium. They have been ultra-low over the past three years, she said.

Anoma Srisukkasem

The Nation