Second Tier Banks Still Losing Depositors to Australian Banking Majors

Post by Sharat on January 7, 2009 · Under Australian Economy, Featured Articles, banking · Comment

Midsized Australian financial institutions continue to lose deposits to Australia’s Big Four Banking groups. Though The Federal Governments deposit guarantee has slowed the transfer of deposits from smaller banks to larger banks, the trend continues.

Data released at the end of December by the Australian Prudential Regulation Authority suggests that all banks during the month of November were able to generate deposit growth including second tier players such as Suncorp Metway and Members Equity, both of whom during the height of the credit crisis were haemorrhaging deposits in September.

The measures undertaken by Kevin Rudd’s government to calm investor and depositor paranoia, by offering a blanket guarantee on all deposits held by Australian banks, and local subsidiaries of international banks seemed to have calmed the nerves of Members Equity customers, with deposits growing by almost 11 per cent in November. In percentage terms Suncorp’s growth was more subdued, rising 1.5 per cent to A$ 12.73 billion. Bank of Queensland also seemed to have benefited and increased its deposit base by A$ 800 million.

Some lenders did not fare so well and actually ended up losing deposits. BankWest which at the time was owned by troubled UK lender HBOS and was subsequently acquired by CBA lost A$ 96 million worth of deposits or 1 per cent.

ING, which markets one of the most successful online deposit products in Australia, appears to have taken the biggest hit from the flight of customers to the major banks, which was probably largely due to the false preconception that customers had for a while, that foreign banks did not benefit from the Federal Government guarantee or that online banks were less safe than banks with a physical presence through branch banking.

Whilst Bankwest, Suncorp and Members Equity all ended the month of November with more deposits on their books than they had at the end of January, ING has suffered a net decline of more than $700 million for the 11-month period. In January ING had a deposit base of more than $17 billion.

Amongst the Australian banking majors, ANZ seemed to benefit the most in November. ANZ’s share of household deposits grew by almost 3 per cent or by A$ 1.5 billion to A$ 53.4 billion. Westpac was the next best performer boosting its base by A$ 1.3 billion to A$ 57.4 billion. National Australia Bank and Commonwealth Bank each grew their depositor base by 1 per cent.

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