Westpac warns of waning rates
Although term deposit rates have risen recently Westpac is picking shorter duration rates will ease in the coming weeks.
Thursday, August 20th 2009, 5:00AM
by Paul McBeth
Westpac is picking short-term deposit rates to come off a little in the next two or three weeks as the cost of credit eases amid lower lending rates. The prediction bucks the trend among the major banks in New Zealand, which largely agree that rates will hang around their current levels for the time being.
Westpac sees deposit rates falling around 25 basis points in the next couple of weeks, according to general manager of product David Cunningham, as the cost of borrowing from wholesale funds has started to decline to more reasonable levels and recent cuts to mortgage rates by some of the banks puts some pressure on profit margins.
A fall would be "driven by tighter credit margins and cuts in wholesale interest rates for lenders," Cunningham said. "This is unquestionably the most competition in deposits that I've ever seen before - there' s been nothing like this since the mortgage price war five years ago."
Still, longer term deposit rates are likely to rise as longer fixed-term mortgage rates go up, he said.
Last week the banks upped the stakes in the deposit war as ASB, ANZ and National Bank boosted rates in the five- and six-month spaces respectively. ANZ and its stablemate National Bank are fighting each other in the six-month space, while Westpac, BNZ, and ASB are tussling over the five-month space. KiwiBank has stayed in the four-month space.
Bruce Thompson, a spokesman for KiwiBank, said what the government decides to do with its retail deposit guarantee, which expires in October next year, may impact on pricing for deposit rates.
Still, he expects "spreads between retail and wholesale interest rates to return to historic levels over time."
BNZ didn't see deposit rates dropping in the short- to medium-term due to the ongoing competition in the space.
Similarly, Ian Park, chief executive of retail banking at ASB, said any drop off in rates was "some way off as excessive competition in the deposit space drives pricing."
ANZ is set to boost its share in the $100 billion market by a few hundred million dollars as it soaks up deposits from the failed ING funds.
Park said ANZ's offer of around 8% to the ING investors was too high for ASB to make a bid for their custom, and while he said he would like to take them on board, it was not really feasible.
Cunningham said that the investors' deposits were a relatively small part of the market, but declined to comment on whether Westpac would be making a pitch for them.
ANZ National Bank declined to comment on either its outlook for deposit rates or the inbound deposits from the ING investors.
Paul is a staff writer for Good Returns based in Wellington.
| « General Finance improves quality of its loan book | Marac faces long road to bank status » |
Special Offers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
