Cash Abdication

The cash is king catch cry for the security of asset allocation has resonated loud and wide during the Global Financial Crisis.

Yet emerging data reveals the flight to cash tipping point may be nearing.

A tiny 0.2 per cent growth in retail deposits was recorded for banks operating in Australia during May 2009 with investor appetite for higher yielding asset classes building, analysis reported in the CoreData Australian Cash Report shows.

The slowing cash asset growth is evident over a longer time scale, with the three months to May 2009 recording a 2.7 per cent increase, compared to 3.7 per cent for the previous three month period and the 8.2 per cent jump for the three month period that included September 2008, the month that will long be remembered for when Lehman Brothers collapsed and almost brought the whole global system down around it.

The Australian Cash Report analysis shows Commonwealth Bank sitting on $140 billion, (Bankwest $15 billion) in retail deposits.

The data shows CBA is maintaining a stranglehold on the retail deposit landscape, holding one in three of all dollars deposited, with the combined post merged big four holding 82 per cent.

Strong price competition by foreign and tier 2 Australian banks is having little impact on the big four’s dominance, as depositors continue to chase brand over rate.

The newly rebranded ME Bank, (formally Members Equity Bank), continues to provide the highest real rate of return, (excluding bonus and promotional rate offers that often leave the depositor disappointed and confused), yet the bank only holds $900 million in retail deposits, equivalent to 0.6 per cent of the CBA book.