Government Housing Bank (GH Bank) wants to tap wealthy customers by offering high-value savings lotteries, aiming to become a new choice for people looking to diversify investment risk and earn a decent return amid a possible global recession and high inflation rate.
Bank president Chatchai Sirilai said the high-value savings lotteries target wealthy customers looking for a secure investment asset, as the bank is owned by the government.
The lotteries' interest rates are close to or lower than the market's deposit interest rates offering similar maturities, but buyers of GH Bank's savings lotteries have a chance to win large prizes from the lucky draws.
If the prizes are combined with the interest earned, the total return rate of the lotteries should exceed those for deposit accounts, he said.
The bank intends to continue to offer this kind of high-value savings lotteries this year, says Mr Chatchai.
Mr Chatchai recommended investors earmark 30% of their portfolio for investment in GH Bank's high-value savings lotteries, with the rest allocated to other high-return assets.
In late 2019, the bank launched 3,000 units of the savings lotteries worth 10 million baht per unit.
The two-year lottery offers a return rate of 1.2% per year, he said. These lotteries hold a lucky draw every quarter and offer three first prizes, each worth 3 million baht.
HIGH PROBABILITY
These sets of lotteries received an overwhelming response from buyers and sold out quickly, encouraging the bank to offer a similar set in 2021, totalling 1,000 units worth 10 million baht per unit, said Mr Chatchai.
For the new sets, the return rate is 0.80% per year. The lucky draw for the first, second and third prizes is held every month. The first prize is 1 million baht.
He said GH Bank designed its saving lotteries to be different from those of other state banks by focusing on affluent buyers.
Mr Chatchai said the appeal of GH Bank's high-value savings lotteries is the "high probability" of winning big prizes because there are a low number of units available. Other banks offer savings lotteries with often a million units issued, he said.
SOLVING FUNDING MISMATCH
In addition to expanding the customer base to wealthy buyers, high-value lotteries also aims to sort out GH Bank's funding mismatch.
While the bank extends long-term mortgages to borrowers, most of its funding comes from short-term deposits. Offering lotteries with a maturity of 2-3 years is one way to address this off-balance schedule of funding, said Mr Chatchai.
The bank intends to continue with high-value savings lotteries this year, but will monitor market interest rates before setting rates for lotteries and lucky draw prizes, he said.
Mr Chatchai said wealthy people are looking for high-return products as interest rates are elevated in many parts of the world.
Recently GH Bank launched a deposit product called "New Freshy" to tap the wealthy. The product offers a maturity of three years and a step-up interest rate, with average interest of 2.11% per year.
The package raised 30 billion baht of deposits within one day of the launch.
SLOW AND STEADY
In December 2022, GH Bank decided to raise deposit interest rates for fixed deposit packages of two years, three years and five years, but maintain its loan interest rate after the Bank of Thailand's policy rate hike in November last year from 1% to the current 1.25%.
GH Bank plans to keep its loan interest rates steady until the end of this month to ease the interest burden of its borrowers, he said.
Large local commercial banks began to increase their deposit and loan interest rates across the board from early December 2022 after the central bank's third rate hike of the year in November.
A local research house estimates the Bank of Thailand will increase its policy rate to 2% around the middle of 2023, then hold the rate steady.
GH Bank granted total new loans worth 286 billion baht last year, exceeding its target by 26%.
The bank's non-performing loans tallied 3.7% last year, down from 4% at the end of 2021.
GH Bank set a target for new loans worth 230 billion baht this year, higher than last year's target of 226 billion by 3%.
As of Oct 31, 2022, GH Bank had 130,000 outstanding accounts for savings lotteries worth 120 billion baht. The bank's deposits stood at 1.39 trillion baht, of which the savings lotteries account for 9%.
Most buyers of its savings lotteries are in the central part of Thailand and 67% of buyers are older than 55.