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Retail deposit surge cushions banks: Reserve Bank

A surge in retail deposits is cushioning New Zealand's banks from having to borrow offshore as much as previously, the Reserve Bank says.

Friday, December 9th 2011, 6:43AM 1 Comment

by Jenny Ruth

 

 

"Banks are experiencing strong deposit growth with annual growth running close to 9% in October," the central bank says in its latest monetary policy statement.

"This equates to close to $13 billion in extra deposits, taking the stock of retail deposits to about $160 billion," it says.

At the same time, credit growth has been "very tepid" since the middle of 2009.

"The stock of loans and advances for registered banks is approximately $320 billion and has barely risen over the past 12 months."

Between October last year and October this year, loans and advances rose just 1.5%, or just under $5 billion, reflecting the weak economy, global market uncertainty and pressures on households and businesses to reduce debt.

"If current trends in deposits and credit continue, only a modest level of wholesale term funding will need to be raised over the coming year," the Reserve Bank says.

It estimates banks have about $15 billion of maturing core funding over the next 12 months or so and, if credit growth remains subdued, most of that could be met from retail deposits.

Bank funding costs have been relatively steady over the last 18 months but they are currently nearer the top end of recent experience, driven by higher long-term wholesale funding costs.

"Recent deals transacted in international funding markets have been particularly costly to banks, suggesting significant upward pressure at present," the central bank says.

It expects the pricing pressures on bank funding to remain high over the foreseeable future and that could eventually lead to higher retail interest rates.

"Should wholesale term funding markets remain problematic well into next year, there is the risk of local banks tightening lending conditions or upward pressure on interest rates faced by domestic firms and households."

 

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Comments from our readers

On 9 December 2011 at 1:21 pm Nick said:
Fantastic news - looks like NZ might finally be getting ahead of the 8-ball (or, at least, not so far behind it).
Commenting is closed

 

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AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 5.50 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 ▼3.85 ▼3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.55 2.65 2.79
Kainga Ora 4.43 ▼2.93 ▼3.07 ▼3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.45 2.99 3.35
SBS Bank 4.54 ▼3.05 3.19 ▼3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - ▼2.55 2.69 ▼2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 ▼2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 ▼3.29
TSB Bank 5.34 3.35 3.49 3.79
TSB Special 4.54 2.55 2.69 2.99
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Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.05 3.13 3.12

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