Gareth Hutchens July 14, 2012
Interesting: NAB has increased deposit rates. Photo: Nicholas Walker
RETIREES and savers can look forward to higher returns on their savings after National Australia Bank this week surprised investors by increasing deposit rates.
NAB's online arm, UBank, said the rises would apply to term deposits and standard at-call accounts.
UBank's standard USaver account rose 10 basis points to 5.01 per cent. Its 12-month term deposit rate rose 25 basis points, to 5.31 per cent while its three-month rate increased 5 basis points, to 5.11 per cent. Higher rates are available from online-only savings accounts, including 5.75 per cent from Westpac-owned RAMS and 5.7 per cent from Citibank.
Analysts said the major banks had been competing more aggressively for deposits over the past six months, but the rates they were paying in excess of the bank-bill swap rate - the ''spread'' that supports banks' margins - had fallen from a peak of 180 basis points to about 130 basis points.
So while competition was hot in recent months, particularly after Westpac's shock profit result and Gail Kelly saying she wanted to compete for deposits, the sector has cooled a little.
ANZ chief of Australian operations Philip Chronican said yesterday competition in the ''term deposit space'' remained strong but it was continuing ''to put pressure on margins''.
BBY analyst Brett Le Mesurier said NAB had been in the weakest funding position of the big banks for the past three years while Commonwealth Bank was the best positioned, followed by ANZ and Westpac.
''[NAB] went for volume growth on the loan side through their Break-Up campaign, and they offered mortgages at cheaper rates, so they got more volume,'' Mr Le Mesurier said. ''But their margin was crunched and it also exacerbated the funding disadvantage they had.
''This is why they haven't passed on all their cash rate increases, and their standard variable has gone back closer to the other majors.''