ANZ, with term deposit book shrinking, says it has boosted margin on term deposits by avoiding 'hot money' and growing 'better quality' accounts

By Gareth Vaughan

 The ANZ Group says it has achieved an up to 20 basis points margin improvement on its New Zealand term deposits by avoiding the pursuit of "hot money."

In a presentation given by ANZ's Group CEO Mike Smith to investors at a Credit Suisse conference in Hong Kong this week, Smith noted ANZ's New Zealand deposit strategy focussed on growing better quality call and savings accounts, which were up 15% year-on-year.

"A disciplined approach to pricing on term deposits also achieved a margin improvement of 15-20 basis points on the term deposit portfolio," Australia's ANZ Group, which owns the ANZ and National banks, plus fund manager OnePath and finance company UDC Finance in New Zealand, said.

 Asked what this "disciplined approach" involved, an ANZ New Zealand spokesman told interest.co.nz ANZ had; "avoided chasing ‘hot money’ which inflates deposit ratios in the short term, but can not be relied upon in the long term because it will move to whoever bids the highest. Our focus is on having a good range of competitive products for the mass market."

ANZ NZ's latest general disclosure statement shows in the December quarter its term deposits fell NZ$850 million to NZ$32.9 billion. It paid NZ$981 million of interest in the quarter, down NZ$21 million from NZ$1.002 billion the same period of 2010.

Overall, ANZ's "deposits and other borrowings", which includes  NZ$3.7 billion of commercial paper and UDC Finance's NZ$1.4 billion of secured debenture stock,  rose NZ$149 million to NZ$69.4 billion in the December quarter. Its major rival banks all grew their deposits in the three months to December 31. BNZ led the way with NZ$1.8 billion growth, followed by ASB's NZ$1.7 billion, Westpac's NZ$1.2 billion, and Kiwibank's NZ$489 million.

ANZ and National Bank's advertised term deposit rates - for deposits of at least NZ$10,000 - are similar to those of their rivals, although in the one to five year category recent increases from Kiwibank give it some of the higher rates on offer, along with RaboDirect, BNZ - with a minimum NZ$5,000 deposit - and TSB Bank. See all banks' advertised term deposit rates for one to nine months here and see all banks' advertised term deposit rates for one to five years here.

In the ANZ Group's first quarter trading update last month Smith said net interest margins at ANZ NZ continued rising in the December quarter, but were unlikely to rise further because of stiff competition among the banks for deposits.

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