Banks are marketing special deposit account products more aggressively these days. With the low returns from time deposits and fixed-income instruments, people are looking for more alternatives and I actually witnessed this in a bank branch the other day.
The Philippine Daily Inquirer’s Doris Dumlao reports today that as of February 8, SDAs have sucked in P546 billion of the money in the banking system. Read her article here.
Here are some useful figures to remember from this article:
P546.35 billion – money placed in SDAs as of Feb. 8, which is more than double the P233.65 billion absorbed by the BSP from the banking system via its overnight borrowing facility as of the same date.
6% to 6.5% -- the range of yields of SDAs with varying maturity that make them more attractive than any other fixed-income instruments. Mutual funds with access to SDAs—those affiliated with banks—outperformed other fixed-income securities-based mutual funds in 2007.
5.88% -- yields of 10-year Treasury bonds auctioned by the National Government last January.
8.06% -- average yield of 10-year T-bonds issued in 2006
11.69% -- average yield of 10-year T-bonds issued in 2005
Looking at these figures, it seems the current state of the economy is good for banks. These are very cheap funds that they can lend at high rates. Maybe, it would be a good idea to watch out how bank stocks will do this year.
Special deposit accounts as alternative to time deposits
Banks are marketing special deposit account products more aggressively these days. With the low returns from time deposits and fixed-income instruments, people are looking for more alternatives and I actually witnessed this in a bank branch the other day.
The Philippine Daily Inquirer’s Doris Dumlao reports today that as of February 8, SDAs have sucked in P546 billion of the money in the banking system. Read her article here.
Here are some useful figures to remember from this article:
P546.35 billion – money placed in SDAs as of Feb. 8, which is more than double the P233.65 billion absorbed by the BSP from the banking system via its overnight borrowing facility as of the same date.
6% to 6.5% -- the range of yields of SDAs with varying maturity that make them more attractive than any other fixed-income instruments. Mutual funds with access to SDAs—those affiliated with banks—outperformed other fixed-income securities-based mutual funds in 2007.
5.88% -- yields of 10-year Treasury bonds auctioned by the National Government last January.
8.06% -- average yield of 10-year T-bonds issued in 2006
11.69% -- average yield of 10-year T-bonds issued in 2005
Looking at these figures, it seems the current state of the economy is good for banks. These are very cheap funds that they can lend at high rates. Maybe, it would be a good idea to watch out how bank stocks will do this year.
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How can I open an SDA? I want to open one for my son with his "pamasko" and "pakimkim". I was initially planning a regular TD, but this SDA sounds better.
Here, one bank is offering e-savings 5.99 pa, no holding period, funds accessible anytime, no withdrawal limits, tax free, interest paid monthly. Drawbacks: you can only withdraw through online fund transfer and interest is based on the lowest balance within the month.
Even with the drawbacks, I guess, it's the best deal around here in Doha and the drawbacks can be avoided by opening a separate savings account where funds can be transferred online and by managing deposits and withdrawals so as to maximize the interest per month.
Peter,
I think you can only access the SDA indirectly through money market funds. Ask your bank about it.
Sir Peter,
You can go to any Trust Department of a bank to open an SDA IMA Account, you can call me at Allied Bank Trust Department if you want to open with us. (Editor's note: Contact details have been removed for the reader's security. However Salve will email the contact details to Peter.)
Salve, Hi, I met you at the RFP Networking Night I was the one wearing white polo. :)
it's time to call my industry insider friends :P
i already closed my TD last year and looking for alternatives
Do all banks offer SDA?
Try the Rural banks since they offer high interest rates at minimum of 10% to 20 percent per annum since PDIC is there as a safety net just in case the bank closes .... so which investment gives you that safety net with high interest rate ...
I just want to ask which banks in our country offer the best SDA? I'm also concerned about the security of SDA and above all the interest and holding time.
use rural banks at your own risk PDIC only covers up to a specific amount per account so if you put in 5 thousand you get back the five thousand but if you put in 1 million you'll only get back around 50 thousand i think they will not cover you for the whole million
The Special Deposit Account while being marketed by most banks is actually a borrowing by the Bangko Sentral ng Pilipinas (BSP). On this note, this makes the investment default-risk free or your almost sure that you get your money back. It's like having a time deposit with the central bank.
now why do banks offer it? Banks are just pass through facilities or intermediaries. They earn fees by offering it.
Being a BSP borrowing, i would say this is already much better than a time deposit with an ordinary bank that just offers a P250,000 PDIC Coverage.
What does this mean? Say you have a 1million investment with Bank A. Then Bank A can't pay you anymore, PDIC now gives you P250,000. On the other hand, if you have 1M investment in the SDA, the gov't can always print money to pay you. so you get your full 1M. Now that is something an ordinary bank can't do.
Most financial institutions with TRUST departments offer this investment. You can check out your bank.
WHo offers the Best SDA?
The BSP has a fixed gross rate for certain terms: Example for
30 days - 5.25%
60 days - 5.25%
90 days - 5.3125%
180 days - 5.50%
It now depends how much is the fee charged by your bank to know what is your effective return.
if you're interested in the SDA you better ask your local bank before Thursday afternoon as the BSP may lower its rates by Friday.
Hope this helps
nina Says:
March 4th, 2008 at 9:21 pm
Here, one bank is offering e-savings 5.99 pa, no holding period, funds accessible anytime, no withdrawal limits, tax free, interest paid monthly. Drawbacks: you can only withdraw through online fund transfer and interest is based on the lowest balance within the month.
Even with the drawbacks, I guess, it’s the best deal around here in Doha and the drawbacks can be avoided by opening a separate savings account where funds can be transferred online and by managing deposits and withdrawals so as to maximize the interest per month.
I am askin:
Where is this bank or any banks in Metro Manila offering this kind of a deal?
vox populi
Hi Vox Populi,
Sorry the bank is here in Qatar and not in Manila but our readers might know some deposit/investment in Phil banks which provide very good returns.
regards,
NINA
At this time, earning from your investment is not the goal. It's buying time.
I inquired about SDA from almost 10 banks here in Ortigas and only found 1 bank that has a minimum placement of 100k with 4.45% net interest for 30 days. The typical minimum is 1M. The only downside I see is that SDA does not offer automatic roll-up so I need to go back to the bank every month.
From the net, I only found Metrobank posting SDA for individual depositors. But minimum is 5M. huhuhuhu... dont have that extra cash.
@Ros, which banks have minimum of 1M?
wish banks can have savings product like a savings builder.. one gets to choose a savings plan with corresponding interest...there is a fixed amount of savings u deposit every month...
Banks are marketing special deposit account products more aggressively these days. With the low returns from time deposits and fixed-income instruments, people are looking for more alternatives and I actually witnessed this in a bank branch the other day. The Philippine Daily Inquirer’s Doris Dumlao reports today that as of February 8, SDAs have sucked in P546 billion of the money in the banking system.
Best regards, Alex, CEO of youtube video downloader
Banks are marketing special deposit account products more aggressively these days. With the low returns from time deposits and fixed-income instruments, people are looking for more alternatives and I actually witnessed this in a bank branch the other day. The Philippine Daily Inquirer’s Doris Dumlao reports today that as of February 8, SDAs have sucked in P546 billion of the money in the banking system.
Best regards, Alex, CEO of youtube video downloader
Even with the drawbacks, I guess, it’s the best deal around here in Doha and the drawbacks can be avoided by opening a separate savings account where funds can be transferred online and by managing deposits and withdrawals so as to maximize the interest per month.
Best regards, Katya, CEO of cd rw burner, microsoft iscsi initiator xp
Short-term liability products of the BSP with tenors range from 3 days to 2 months. These are relatively risk-free investment in terms of credit risk since it is issued by the BSP which is a government agency. These are evidenced by a Participation Agreement. Interest on both SDA and RRP is subject to a 20.0% final w/tax. The rate offers a premium of 1.0-1.5 percentage points over the BSP overnight borrowing rate. Rates remain unchanged at 6% as of November 20, 2008.
Trust departments may pre-terminate their SDA placements, either fully or partially. If the holding period of the SDA placement when it is rate pre-terminated is less than 50% of the original tenor of the said placement, the applicable interest rate for the pre-terminated amount will be the rate dealt on value date less two percent (2%) p.a. If the holding period is 50% or more of the original tenor, the applicable interest rate for the pre-terminated amount will be the rate dealt on value date less one percent (1%) p.a. The pre-termination rate shall apply only to the amount pre-terminated.
Last year, the BSP opened its Ginault Watches
facility to trust entities but later closed three of its six SDA windows as liquidity growth slowed down.
Are people aware that contracts for difference are a good way to invest nowadays ? Or maybe it's just for the ones who are bold enough to try it. Also I wouldn't recommend you invest your only money into this as the fluctuations in the market can make you loose everything.