Households and businesses have shifted their savings from transaction accounts to high-yield savings and term deposit accounts this year, a trend that it will make it harder for banks to hold on to the margin improvement they have enjoyed.
Macquarie Securities has broken down the retail and business books of the big banks to measure the impact of “the most attractive deposit rates in almost a decade”.
In the first half of 2022, 31 per cent of Commonwealth Bank’s retail and business deposits were in transaction accounts and 21 per cent were in term deposits. In the first half of this year, the proportion of deposits in transaction accounts fell to 29 per cent, while the proportion in TDs rose to 25 per cent.
At ANZ and NAB, the changes have been more marked. The proportion of ANZ retail and business deposits in TDs has increased from 15 per cent to 24 per cent over the same period, while at NAB the shift has been from 19 per cent to 29 per cent.
Macquarie said: “We expect an ongoing shift from cheaper deposits to more expensive categories, partly unwinding the funding benefits that banks enjoyed in recent periods.”
It said Australian banks are under pressure to maintain deposit flows. “Australian banks’ funding positions have improved in recent years but they remain underweight deposits relative to other developed markets, including the United States, United Kingdom and Canada.
“Their loan-to-deposit ratios remain well above 100 per cent, suggesting a meaningful ongoing reliance on wholesale funding.”
Macquarie said most banks passed on the cash rate increase to depositors in June, “signalling the end of further margin accretion from savings accounts.” TD rates also increased “meaningfully”.
Macquarie estimates that ANZ’s net interest margin will fall 5 basis points in the 2023/24 financial year. CBA’s will fall 8 bps, NAB’s 3 bps and Westpac’s 4 bps.