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Retail Deposits in Australia

Datamonitor
July 10, 2009
16 Pages - SKU: DFMN2391902

Abstract Table of Contents Search inside this report Related Reports

Countries covered: Australia

Introduction

In the wake of the global financial crisis, banks have tried to strengthen their balance sheet by attracting a larger deposit base. With the dearth of affordable wholesale funding, retail deposits have become a more important source of funding. This report analyzes a retail deposit market in which competition is heating up.

Scope

Includes a comprehensive overview of the Australian deposit market.
Draws upon a large Datamonitor consumer survey of Australian deposit account customers.
Forecasts upcoming market developments.
Includes market overview, analysis of consumer behaviour, competitor dynamics and future developments.

Highlights

Household deposits have grown at a relatively fast pace in Australia over the last five years, with growth picking up in the last two years. Between April 2004 and April 2009, household deposits on the books of Australian banks grew from A$234bn to A$429bn.

In the Datamonitor AFS survey, 86% of respondents found it 'Very likely' or 'Quite likely' that unemployment would rise in the next 12 months. More than two thirds of respondents found it 'Very likely' or 'Quite likely' that Australia would enter recession during the same time frame, and 59% thought average property prices would fall.

Interest rates have converged over the last several years, with the difference in interest rates between different products becoming smaller. In many cases online savings accounts have driven up the rate of less competitive-priced products.

Reasons to Purchase

Improve your strategic position using Datamonitor's in-depth analysis of the Australian deposit market.
Understand the unique challenges the deposit market is facing, and benefit from forecasts of future product trends.
Gain insight into the current mindset of Australian deposit customers.

Overview: Catalyst; Summary; Executive Summary; Market context; Deposits have grown strongly in Australia over the last decade; Product innovation has encouraged deposit growth; Supplying retail deposit products has several important advantages for banking providers; Consumer focus; The global financial crisis has eroded consumer confidence; Consumers seek the safe haven of institutions that are considered safe; Many consumers are planning to take up a savings account in the next 12 months; Consumer satisfaction with deposit products is relatively high but has recently fallen; There is a complex and changing relationship between transaction accounts and savings accounts; Product focus; Deposit products vary in terms of rates and conditions; Rates on deposit products are in a state of flux; Average rates have recently fallen and converged; Competitor focus; The major banks have grown their household deposit base; There are different strategies when it comes to retail deposits; Future focus; The internet will become yet more important for deposit products; Product convergence will create new deposit products; Competition will push rates higher and fees lower; Deposits 2.0; Table of Contents; Table of figures; Table of tables; Market Context; Deposits have grown strongly in Australia over the last decade; Total Australian bank deposits have almost quadrupled in the last 10 years; Product innovation has encouraged deposit growth; The global financial crisis has made deposits more attractive for banks and consumers alike; Household deposits have become more important in recent years; Household deposits have shown especially strong growth over the last two years; Household deposits' proportion of total deposits has grown in the last 18 months; Supplying retail deposit products has several important advantages for banking providers; Deposit products tie a consumer to the bank; Deposit products offer opportunities for cross-selling; Deposit products generate significant fee income for banks; Consumer Focus; Consumer attitudes toward deposits and banks have shifted; The global financial crisis has eroded consumer confidence; Consumers seek the safe haven of institutions that are considered safe; Many consumers intend to take up deposit products; A quarter of consumers without savings accounts are planning on taking up the product within 12 months; Action does not always follow intention when it comes to saving; Consumer satisfaction with deposit products is relatively high but has recently fallen; Savings accounts command a higher degree of satisfaction than transaction accounts; Satisfaction with providers has fallen for both transaction and saving accounts; Internet banking is highly regarded by consumers; Reasons for choosing account providers are changing; There is a complex relationship between transaction accounts and savings accounts; Savings account providers are often chosen based on rates; Online only savings account holders have distinct attitudes; Online-only savings account holders hold more money in their account; A significant proportion of consumers would like to arrange accounts via the internet; Product Focus; There are a number of competing products in the retail deposit market; Deposit products vary in terms of rates and conditions; The first home saver account is a new product type; Rates on deposit products are in a state of flux; Rates vary between different deposit products; Interest rates vary strongly; Average rates have recently fallen and converged; Term deposit rates and online savings account rates have converged; Bank margins on deposits have fallen; Competitor Focus; The major banks compete for household deposits; The major banks have grown their household deposit base; The 10 largest banks account for 96% of total bank deposits; The Commonwealth Bank has the highest market share of bank household deposits; The major banks differ in their focus on retail deposits; There are different strategies when it comes to retail deposits; Strategies vary in terms of cost and time horizon; The major banks face challenges which smaller players do not; Future Focus; Product innovation and evolution will continue; The internet will become yet more important for deposit products; Product convergence will create new deposit products; The convergence of account types will have a profound effect on the Australian deposit market; The eventual economic recovery will change the playing field in the deposit market; New entrants will return to the market; Competition will push rates higher and fees lower; Deposits 2.0
APPENDIX: Data tables; Methodology; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: Household deposit growth rates; Table 2: Deposit product types vary in terms of features; Table 3: Household deposit growth rates; Table 4: Household deposits and retail mortgages in April 2009; Table 5: Almost half of consumers would rather use the internet for managing finances, April 2004; Table 6: Total bank deposits, March 1999-Mar 2009; Table 7: Household bank deposits, April 2004-April 2009; Table 8: Proportion of total deposits that are household deposits, April 2004-April 2009; Table 9: Reasons for choosing provider of financial products, April 2009; Table 10: Bank fees derived from households, 1997-2008; Table 11: General economic confidence of Australian consumers, April 2009; Table 12: Personal economic confidence of Australian consumers, April 2009; Table 13: Attitudes towards financial services, April 2009; Table 14: Savings account holdings and intentions, April 2009; Table 15: Financial product intentions, April 2009; Table 16: Account satisfaction, April 2009; Table 17: Satisfaction with transaction account features, April 2009; Table 18: Reasons for choosing transaction account provider, April 2009; Table 19: How long different groups have held their transaction account, April 2009; Table 20: Reasons for choosing savings account provider, April 2009; Table 21: Reasons for choosing savings account split by account type, April 2009; Table 22: Attitudes toward savings account by account type, April 2009; Table 23: Attitudes toward savings account, April 2009; Table 24: Amount held in savings account by account type, April 2009; Table 25: Considerations if getting new savings account, April 2009; Table 26: Account arrangement and preferences, April 2009; Table 27: Average bank interest rates for different products, April 2004-April 2009; Table 28: Cash rate target, January 1993-June 2009; Table 29: Rate difference between online savings accounts and one-year term deposits, April 2004-April 2009; Table 30: Margin of three month bank accepted bill rate over different deposit products, April 2006-April 2009; Table 31: Household deposits by bank, April 2004-April 2009; Table 32: Household deposits on the books of banks, April 2009; Table 33: Market share of bank household deposits, April 2009; Table 34: Household deposits and non-household deposits by bank, April 2009; Table 35: Proportion of banks' total deposits that are household deposits, April 2009; Table 36: Reasons for avoiding the internet channel for arranging financial products, April 2009; Table 37: Ratio of bank interest expenses to bank deposits, June 2004-December 2008
List of Figures: Figure 1: Interest rates for different product types have converged, April 2004-April 2009; Figure 2: Total bank deposits have grown strongly in Australia over the last decade, March 1999-March 2009; Figure 3: Household deposits have shown strong growth over the last two years, April 2004-April 2009; Figure 4: The proportion of deposits that are household deposits has increased since 2007, April 2004-April 2009; Figure 5: In the last 18 months household deposits have become more important for banks, November 2007-April 2009; Figure 6: Transaction accounts frequently influences the choice of provider for other products, April 2009; Figure 7: Transaction accounts generate significant fee income for banks, 1997-2008; Figure 8: Most Australians feel that the economy will deteriorate over the next 12 months, April 2009; Figure 9: A significant proportion of consumers are concerned about their ability to pay their bills, April 2009; Figure 10: Consumers gravitate toward established domestic financial institutions, Apr 2009; Figure 11: A quarter of those without a savings account plans on taking one up within 12 months, April 2009; Figure 12: Many of those without a savings account plan on taking one up within 12 months, April 2009; Figure 13: Savings account customers are generally satisfied with their provider, April 2009; Figure 14: Satisfaction with transaction account provider has fallen, April 2009; Figure 15: Satisfaction with savings account provider has fallen, April 2009; Figure 16: Internet banking is the most highly regarded aspect of transaction accounts, April 2009; Figure 17: Savings accounts can drive choice of transaction accounts, April 2009; Figure 18: Choosing transaction account based on where savings are held has become less common, April 2009; Figure 19: Rates drive choice of savings account provider, April 2009; Figure 20: Online savings account holders are more rate-sensitive, April 2009; Figure 21: Online savings account holders are more active and rate-sensitive customers, April 2009; Figure 22: The rate is the most important consideration if getting new savings account, Apr09; Figure 23: Online account holders hold more money in their account, April 2009; Figure 24: A significant proportion of consumers would like to arrange deposit products online, April 2009; Figure 25: Online savings accounts have the highest interest rates, April 2009; Figure 26: The cash rate target has dropped sharply, June 1999- April 2009; Figure 27: Interest rates for different product types have converged, April 2004-April 2009; Figure 28: One-month term deposit rates are now closer to rates on online savings accounts, April 2004-April 2009; Figure 29: Margins of deposit rates over short-term money market rates have fallen, April 2006-April 2009; Figure 30: Bank household deposits have grown strongly, April 2004-April 2009; Figure 31: CBA has the highest amount of household deposits, April 2009; Figure 32: The two major banks control more than half of all bank household deposits, April 2009; Figure 33: Westpac has higher non-household deposits, April 2009; Figure 34: CBA derives the highest proportion of total deposits from household deposits, April 2009; Figure 35: Lack of interactivity is a common reason for avoiding the internet channel, April 2009; Figure 36: The proportional interest rate cost for deposits has increased, March 2005-December 2008; Figure 37: A unified online platform provides advantages to provider and consumers alike

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