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deposit rates

PSIS says margin on deposits more than halved

PSIS says it has had to cut the margin between its floating lending rates and term deposit specials as the credit crisis took hold.

Wednesday, 17 June 2009

by Paul McBeth

The difference between its floating rate and six month term deposit narrowed to 70 basis points from 180 points in June last year as the central bank slashed the official cash rate 5.25 percentage points to deal with the global economic downturn. Deposits rose 8% to $1.1 billion and helped underpinned the cooperative's liquidity in a year where it made an underlying profit of $3.9 million.

The cooperative's special deposit rates "are 10 to 15 basis points above the competition" said chief executive Girol Karacaoglu. "Our position in general is that we try to keep deposit rates a little bit above or equal to the main banks and competitors."

Banks and non-bank deposit takers have been forced to compete for a dwindling pool of assets domestically as credit lines dry up, and term deposit rates have remained resilient despite the central bank slashing the official cash rate to a record-low 2.5%.

Although the PSIS doesn't have to contend with the major banks' bidding for wholesale depositors, the retail market is tight, and chief financial officer Mark Wilcox said investors aren't unwilling to accept returns much lower than 4%.

Karacaoglu was pleased with the prospect of increased saving from higher deposit rates, and dismissed the notion that the economy would be lifted out of recession by stoking consumer spending.

He said the co-operativewas focussed on retaining customers in the current market.

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