Lemon Aid
Calling the Tier 2 banking sector in Australia a ‘lemon’ may be a touch harsh, but the sector’s recent customer acquisition performance is leaving a very bitter taste in the mouths of their chief executive officers and shareholders alike.
Take ING Direct for example. The retail deposit book has increased just 1.4% to $16.9 billion for the year to March 2010, compared to system growth of over 7%, and that’s even with Billy Connolly continually shouting at us ‘it’s your money’.
The ING Direct lack of retail deposit growth therefore directly impacts lending, with mortgage book growth of just 4.4% to $36.1 billion for the same period.
But ING Direct is not alone. Bendigo and Adelaide Bank retail deposits increased 3.2% for the period to $16.8 billion, yet the bank’s mortgage book fell 5.0% to $24.6 billion.
Suncorp retail deposits increased 6.9% to $14 billion, with the mortgage book squeezing out a 1.6% increase to $28.6 billion.
AMP Bank retail deposits fell 2.0% to $1.3 billion, with mortgages up 1.4% to $8.3 billion.
Bank of Queensland sends a glimmer of hope with retail deposits gaining 3.8% to $14.3 billion, with mortgages jumping 11.7% to $21.6 billion.
But what does this all mean? Well retail deposits are a cheap source of funding, especially important for the Tier 2 banks which have higher wholesale funding charges due to lower agency ratings.
AMP Bank theoretically can fund just 15% of the mortgage book with retail deposits, ING Direct can fund 47%, Suncorp 49%, Bank of Queensland 66% and Bendigo and Adelaide 67%.
Simple equation, restricted retail deposit growth equals restricted lending.
But then take combined mutuals (credit unions and building societies), which currently hold around $58 billion in retail deposits, yet only $48 billion in mortgages.
Mutuals increased both residential deposits and mortgages by over 11% for a similar period, with a much lower overall brand awareness compared to the Tier 2 banks. Bittersweet.
Data for this blog was sourced from the CoreData-brandmanagement’s Australian Mortgage Report Quarter 2 2010 and the Australian Cash Report Quarter 2 2010.
