Thursday, February 11, 2010

Commonwealth enjoys massive windfall as it declines to lift deposit rates

Australian Dollar Rate Outlook

FIRST it was home buyers getting slugged - now it's those of us lucky to have a few Australian dollars to tuck away in a deposit account.

A decision by Commonwealth Bank bosses to keep rates low has delivered a massive windfall - a $2.94 billion half-year profit.

While its competitors were quick to lift deposit rates in a bid to attract customers, the CBA maintained ultra-low rates until the final weeks of the first half of 2009-10. "If you're a CBA shareholder you'd be delighted with the result, but if you're a CBA customer you'd have to be asking yourself if they're providing you with the best possible service," said Choice spokesman Christopher Zinn.

He said savers should shop around: "The banks are fully cognisant that a lot of people just roll over and don't move to take better rates." Figures released by the CBA showed its docile depositors did not move their money into better-paying accounts at rival banks. CBA chief executive Ralph Norris was coy when asked about the windfall reaped from lazy depositors. Asked about the stickiness of so-called "dumb money", Mr Norris said: "There is a proportion of our funds which is less rate-sensitive. that gives us an advantage."

Mr Norris indicated, however, that the bank would soon move to make its transaction and online saver accounts more competitive. CBA, Australia's largest bank, paid a measly average of 2.73 per cent on the $78 billion in its term deposit accounts, almost half what it paid a year ago.
Its plethora of transaction account holders only received a yield of 1.32 per cent on a total of $69 billion, again about half the average rate paid 12 months ago.

The Commonwealth Bank's half-year accounts also show it has been relatively kind to its home loan customers, despite instances of the bank lifting its standard variable rate higher than the Reserve Bank's cash-rate increases.

To read more please visit www.news.com.au

Pounds to Australian Dollars = 1.7611
Euros To Australian Dollars = 1.5350
Australian Dollars to US Dollars = 0.8909
Australian Dollars to New Zealand Dollars = 1.2550

Bye For Now

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