Rabobank says competitive term deposit rates are paying off

Rabobank says competitive term deposit rates are paying off

Rabobank says its market leading term deposit rates have helped it boost the total value of its deposits by about NZ$300 million since March.

The increase comes after Rabobank New Zealand saw its total level of deposits shrink in the March quarter, according to the bank's latest General Disclosure Statement.It shows total deposits of NZ$1.96 billion at March 31, down from NZ$2 billion at December 31.

However, Rabobank spokeswoman Denise Shaw told interest.co.nz more competitive interest rates introduced in early April have brought in both new depositors and extra money from existing customers.

"RaboPlus currently has NZ$2.3 billion on deposit," Shaw said.

RaboPlus lifted its six month, nine month and one year term deposit rates earlier in the year, upping the ante in the battle among banks for term deposits. The banks are striving to raise more funding from local and long-term sources to meet the Reserve Bank's core funding ratio. Introduced in April, the ratio sets out that banks' need to raise 65% of their funding from retail sources and bonds of more than a year in duration. The central bank wants to increase the ratio as high as 75% by mid-2012.

Rabobank's term deposit rates are currently among the best bank rates in the market, with a 12 month rate of 5.6% ahead of the next best of 5.35% from TSB. Its six month and nine month rates of 5.2% and 5.3% respectively, are also market leading. See bank term deposit one month to nine month rates here and see term deposit one year to five years here.

Among other banks Westpac in particular has been targeting deposit growth including by training its staff in their increased importance under the new Reserve Bank regulations, chief financial officer Richard Jamieson says. Westpac grew term deposits by NZ$866 million and ASB by about NZ$800 million in the three months from December 31 to March 31.

Rabobank New Zealand, a subsidiary of a Dutch co-operative with a AAA credit rating, also bolstered its balance sheet by raising NZ$250 million in an April issue of three-year fixed rate senior bonds.

Meanwhile, Rabobank New Zealand's net interest income for the three months to March rose 9% to NZ$46.3 million from NZ$42.5 million and its profit after tax rose 8% to NZ$20.9 million from NZ$19.3 million.

However, the General Disclosure Statement for Rabobank Nederland New Zealand Branch, which primarily covers wholesale business, reveals a 77% fall in after tax profit to NZ$10.9 million from NZ$47.9 million.

This is largely attributable to a NZ$41.3 million loss described as an "other operating loss." Rabobank says NZ$21.4 million of this is due to ordinarily effective hedges becoming ineffective due to the Reserve Bank's requirement that it produce a set of accounts that consolidate a branch together with locally incorporated subsidiaries. The balance of the loss relates to costs from foreign exchange swaps entered into to hedge foreign, mainly US dollar, currency borrowings.

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The Investor,
On your comment 3, we have been asking the banks where they're at with the CFR and the standard answer has been that they've met it. ANZ's Jenny Fagg did tell me, however, in a story on that bank's last financial results that ANZ was already at the 75% level which the Reserve Bank wants to move to (from 65%) by mid 2012.
The Reserve Bank itself said all the major banks were in line with the 65% level as of last November but some only just.
Appreciate your comments and we'll certainly keep an eye on the deposit market.