Aussie banks 'are still keen to secure deposits'

By Mozo ·

Savings rates on term deposits look set to rise as leading banks in Australia alter how their operations are funded.

With the global credit crunch causing Australian regulators to rethink how financial institutions are underpinned, banks have been shifting their focus toward winning over Australian savers in what could be seen as a battle for term deposits.

In short, the money markets are becoming a less viable source of funding, so, as banks vie to attract savings, they are starting to boost their term deposit interest rates in an attempt to stay ahead of the competition.

Speaking to the Sydney Morning Herald about the seismic shift in attitude, National Australia Bank chief financial officer Mark Joiner claimed: "I think competition – particularly on the retail side is here for the next five years – while everyone gets positioned for it."

Savings rates are far higher now than they were prior to the credit crunch and deposit growth is quickly outstripping the rate of lending growth.

This trend has been confirmed following research by Investment Trends, which claimed that the number of Australian financial advisers encouraging their clients to put money into safer investments – such as term deposits – was around 29 per cent. This is a marked increase on last year's figure of 26 per cent.

Of those taking their financial adviser's advice, 20 per cent were putting their money directly into term deposits.

Commenting on the trend, Recep Peker, Investment Trends senior analyst, said: "These levels are significantly higher than June last year, when 18 per cent of new client investments were placed in cash and term deposits."

Term deposit investments could perform even better next year as the National Australia Bank (NAB) expects the cash rate to rise above its current level of 3.5 per cent in 2013.

"While activity is expected to moderate in coming months, reflecting the government's fiscal consolidation and a slowing in consumption growth, a near-term rate cut now appears unlikely," the NAB said.

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