Security Wins

The Commonwealth Bank continues to remain the unrivalled deposit institution of choice for Australians.

The bank generally does not offer a very competitive rate, but does offer the perception of security and overwhelmingly makes the task of depositing cash easy – both of which overwhelm the need for a high rate in the minds of many savers.

In fact both Westpac and CBA are now so big that it is very difficult to grow in line with system.

The National Australia Bank’s rejuvenated focus on retail banking is producing dividends, with the 14.1% deposit book increase to $70 billion for the year to March 2011 almost twice system growth.

A change in marketing plan for ING Direct, with the introduction of the somewhat annoying Orangutan has not yet helped the Dutch owned bank to improve retail deposit inflow in Australia.

ING is unable to make new inflows ‘stick’, meaning the bank offers some market leading rates for new depositors, but as soon as the high interest rate period is finished, the funds are withdrawn and deposited with a new institution which offers an increased return.

In fact at current rates Bendigo and Adelaide Bank is poised to take over from ING Direct ($17.6 billion) as Australia’s fifth biggest bank lender within the next three months.

Bendigo and Adelaide currently holds a $17.5 billion retail deposit book, although the bank’s growth of 6.0% for the year to March 2011 was below system, with the last three months of the period recording just a 0.6% increase.

Bank of Queensland is currently the best Tier 2 Australian bank in executing a customer acquisition strategy, with success in both retail deposits and mortgages.

The bank increased retail deposits by an above system 10.2% for the year to March 2011 and over the same period, boosted the mortgage book by an above system 8.8%.

Deposit inflows are slowing for the Queensland domiciled bank Suncorp, with the 3.6% annual growth to March 2011 less than half system.

It is difficult to substantiate the impact of recent flooding in the state on Suncorp’s deposit book, but it is reasonable to assume that a portion of the recent net outflows are attributable to the customers withdrawing funds to help in the reconstruction process.

Macquarie Bank continues its on again, off again, affair with retail banking in Australia, highlighted by the dramatic swing in the bank’s retail deposit book.

Macquarie actually boosted retail deposits by $3 billion, or 76.4% to $6.9 billion, for the year to March 2011, yet in the last three months of the period actually recorded negative outflows.

The Citigroup deposit book flows has the same characteristics of its foreign and Tier 2 Australian banking peers, in that funds flow in when the deposit rate increases, then churn straight back out once the offer is over.

HSBC appears to be conducting the opposite retail banking strategy to global banking peer Citigroup, with HSBC receiving strong inflows of new deposits.

RaboDirect provides the catalyst for how quickly a retail deposit book can be grown with market leading rates, but the bank’s story also highlights the pitfalls as its market share has collapsed brutally in the past few months.

ME Bank continues to outperform peers in the customer acquisition process, highlighted by the bank overtaking the deposit books of AMP Bank ($1,305 million) and Rural Bank ($1,238 million) in the past six months.

The ME Bank retail deposit book stands at $1,371 million, a 39.3% jump in the year to March 2011, as the bank continues to build brand awareness through the advertising of very competitive products and sports sponsorship.