The major banks are jostling for your investments following the release of blocked funds to Saambou depositors, a loss of confidence in smaller banks and a general hotting up of competition.
Banks embarked on major advertising campaigns and boosted their fixed-deposit interest rates this week in an effort to coax depositors into investing with them.
On Thursday Saambou depositors were able to access money in their bank accounts for the first time since the bank collapsed and was placed under curatorship in February.
However, some banks are misleading consumers with advertising which punts effective, rather than nominal, interest rates. This makes it difficult for you to compare rates between banks. See Interests rates: compare like with like
Banks are offering competitive rates on fixed deposits of between six and 12 months in particular.
Some banks are offering interest of about 11 percent a year on a fixed-deposit over six months. A week ago, they were offering under 10 percent.
Absa adjusted its fixed-deposit rates for six to 12 months to 11 percent on Tuesday, prompting all the other banks to take action. Standard Bank is offering 10.9 percent interest for money invested from six to just under 12 months - a boost of as much as 1.4 percent. Standard Bank's rate for 12 months is 11 percent a year.
Better rates
First National Bank (FNB) is offering up to 0.3 percent more on fixed deposits with a 12-month deposit yielding 11.05 percent. Absa has tweaked its six to 12-month fixed deposits from 10.75 percent to 11 percent. Nedbank and Permanent Bank are each offering 11 percent. All of these rates apply to investment amounts of between R10 000 and R100 000 for investors under the age of 55. If you are 55 and older, you generally qualify for an additional 0.5 percent of interest for deposits of 12 months or longer. See Interest rates: compare like with like
Darrel Orsmond, a director of transaction products at Standard Bank, says competition between banks is "heating up". He says bigger banks continue to jostle for market share and to attract customers from the smaller banks, where depositor confidence is currently not high.
The general adjustment of fixed-deposit interest rates on May 17 was in response to recent movements in longer-term money market rates. This was in anticipation of a repo rate increase next month.
Then on May 22, the rates for fixed deposits of 12 to under 18 months was adjusted again. This was a tactical adjustment in terms of a planned media campaign.
Luigi Magnelli, the general manager of group marketing at Absa, says the bank's fixed-deposit advertising is the third "special" offer this year.
The offer is based on capitalising on the available funds in the market and is part of the bank's funding strategy. It is not aimed directly at obtaining Saambou customers.
Absa's existing advertising and promotion campaigns are designed to attract business, including the customers of other banks.
Willem van Zyl, from FNB, says although one cannot call the current situation a "rates war", it seemed inevitable that banks would compete for the lucrative Saambou business and the best way to attract business is to offer the highest interest rates.
Once the announcement was made that FNB was the only bidder for Saambou Bank, certain competitor banks started to increase their six- and 12-month fixed deposit rates.
"FNB has increased a number of its deposit rates to match those of competitors. Promises to new clients are difficult to keep when offering interest rates which are not competitive.
"On Thursday there was some very aggressive advertising from the banks at rates that were confusing. Our call centres and treasury department had their hands full trying to explain the oppositions' rates," Van Zyl says.
FNB, through its holding company, FirstRand Bank, has taken over Saambou Bank's deposits, savings and transmission accounts and home loans. In terms of the deal, FNB will assume full liability and financial responsibility for Saambou's deposits. Back-dated interest will also be paid on Saambou Money Market and Call Accounts which did not benefit from the prime rate interest increase in March 2002, provided accounts are kept with FNB for at least four months and the minimum balance maintained.