April 20, 2011
Australian investors looked beyond the major banks to deposit household savings in recent months, as smaller institutions’ high interest rates paid off.
One financial institution that reaped the rewards of competition was the Bank of Queensland (BoQ), which is growing deposits at more than twice the pace of its big bank rivals.
"Having good rates is going to attract new customers to the bank," BoQ chief financial officer Ewan Cameron told the Australian Financial Review.
The bank ramped up its push for new term deposit customers, growing household deposits by 1.5 percent in February. That was well ahead of the broader market, which increased by 0.2 percent in the same period.
Businesses fix for the future
Businesses cashed in on smaller institutions competitive rate term deposits this year too, with many looking beyond the major banks for some of the best interest rates on the market.
BoQ grew business deposits by 5.5 percent compared with 1.1 percent growth in the rest of the business term deposit market.
Term deposits were a hot spot for competition within the banking sector in the past year, as banks lifted interest rates on savings accounts to lure new customers.
Why fix your funds now?
The rise in fixed-term deposits may be a sign of lower consumer confidence, with many Queenslanders choosing to save rather than spend in the wake of natural disasters Cyclone Yasi and the January floods.
"People are taking a wait-and-see attitude. They are not feeling too flush, given that asset prices are not going anywhere and day-to-day expenses seem to be on the rise," Cameron told the Australian Financial Review.
Attracting new term deposit clients is in the banks’ best interests at the moment too, given that some bank profits were hit as a result of the natural disasters. Cameron said building a base of term deposits helps the bank avoid reliance on the expensive wholesale funding markets.
Top term deposit rates
BoQ pays 6.2 percent interest on six-month term deposit accounts, topping the market average of 5.65 percent and the major banks that pay between 3.2 percent and 6 percent for balances up to $25,000.
By opting for one of the top rates listed on RateCity for a $25,000 sum you could earn around $789 in interest over six months. By comparison with the market average rate, you could potentially earn about $706 in the same period, which is around $83 more interest.
Evidently, it’s clear to see why so many smaller institutions with competitive interest rates are reaping customers from their big bank rivals.
Related term deposit links