📬 Big Banks Adjust Term Deposit Rates Amid RBA Anticipation

Big banks are cutting term deposit interest rates in anticipation of the Reserve Bank pull-back. The reason is steep competition, hurting profit margins but delighting savers.

The Revelations:

• The Commonwealth Bank last week cut by up to 50 basis points the interest rate on almost all its term deposits.

• On Monday, National Australia Bank and ANZ made changes due to Sunday's changes; the latter moved further ahead to make cuts of up to 80 basis points.

• Both NAB and ANZ increased the eight-month term deposit rate to 4.8 per cent.

• Westpac had not changed its interest rates in term deposits. In a third-quarter report on Monday.

Why it matters:

Interest rates on deposits could reflect in banks' profitability as a consequence of any possible rate cut by the RBA. Banks perform the very important function of financing lending activities; hence, there could be broader effects on the economy.

Bottom Line:

The RBA's decision to keep interest rates may have a more profound impact on the economy and the banking sector as banks seek funding from deposits. If recurring profitability threats persist, future reviews in lending policy and interest rates may follow.