Savings account rates fall away
(11 October 2011 – Australia) Competition for deposits among Australian banks has fallen away with a sluggish outlook for lending causing pricing to drop.
In some cases, rates for term deposits and online savings accounts have fallen as much as 46 basis points in recent months - which is almost equivalent to a two-notch cut in the official cash rate.
At the start of this year banks were trying to outdo each other in high-interest and online savings accounts, the scramble for savings coincided with calls by regulators for banks to reduce reliance on volatile wholesale funding.
The focus on deposits worked. Billions of dollars in additional savings poured into bank accounts. But lending started to tail off and banks found they had excess funding, which prompted many to pull back on pricing.
The latest figures show the banking sector generated A$8 billion more in deposits during August than was needed to meet demand for loans.
According to calculations by broker Deutsche Bank, the lower rates paid to savers will help lift the revenue of big banks by between 3 percent and 4 percent.
At the start of this year banks were trying to outdo each other in high-interest and online savings accounts, the scramble for savings coincided with calls by regulators for banks to reduce reliance on volatile wholesale funding.
The focus on deposits worked. Billions of dollars in additional savings poured into bank accounts. But lending started to tail off and banks found they had excess funding, which prompted many to pull back on pricing.
The latest figures show the banking sector generated A$8 billion more in deposits during August than was needed to meet demand for loans.
According to calculations by broker Deutsche Bank, the lower rates paid to savers will help lift the revenue of big banks by between 3 percent and 4 percent.
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