With loan demand softer than customer deposit growth, banks are now less likely to press for more customer funding. BNZ eases back on some above-rival term deposit rates

BNZ has trimmed some key term deposit rates, reversing some increases made as recently as June 19.

It has taken 10 basis points off its nine and 12 month offers. This takes these offers back in line with its main rivals.

However, it is still offering its 'special' 6.15% for six months, but that offer is set to expire after Wednesday, July 17. 

Apart from that, BNZ's term deposit offers no longer stand out from the crowd, although to be fair the 'special' is pretty distinctive.

Customer deposits provide most of the funding for a bank's lending activity. The Reserve Bank's S40 series shows $452.7 billion of customer deposits (from households, businesses and the government sector) funded bank lending now totaling $564.5 bln (S30). More than half (54%) of that is from households.

So it remains important for banks to attract and keep customer deposits. Total deposits grew $17.7 bln in the year to May, a 4.1% increase.

But bank lending grew $16.7 bln, or 3.0%. That means weak loan growth will be affecting the appetite for more deposit growth. It will of course depend on each bank's specific situation, but overall the pressure is low at present. So it should be no surprise banks are restrained in their deposit offers recently.

Because households keep their maturities so short (L3), that allows banks to respond late because a new offer can have a quick effect.

Across all terms, the highest main bank term deposit offer is still BNZ's 6.15% for six months.

For all banks, the Rabobank 6.30% on-year rate trumps all others. 

Even wider, AMP is now offering term deposits, white-labeling the Heartland Bank options plus a “launch special” premium. That makes its one year term deposit offer 6.30% as well, with Heartland Bank offering 6.20% for that term. For a shorter term AMP's offer is 6.35% for both six and nine months. The premium on these AMP rates expires July 12, 2024.

Topping all for institutions with an investment grade credit rating is Liberty Financial. 6.60% for six months, 6.85% for nine months, and 7.10% for one year. (Liberty's credit rating is the same as for Heartland Bank, SBS Bank, and Co-operative Bank).

(Higher rates again are available from others, but these have sub-investment grade credit ratings).

We should also point out that after-tax returns can be enhanced for some savers with higher tax rates, by the choice of PIE structures. Not all banks offer these, but most of the main banks do. For a nine month bank offer, they can be boosted by about ~30 basis points going this way. In some cases that will make up any difference, or more.

Always ask a bank for a better rate. Many bank staff have discretion to offer more than the advertised rate. (And check your bank's app offers as they too are often enhanced to retain you).

Use the term deposit calculator here, or the one below the table, to calculator your expected net returns.

The latest headline term deposit rate offers are in this table after the recent increases.

for a $25,000 deposit July 4, 2024	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Main banks
ANZ	AA-	4.30	5.90	6.00	5.90	5.90	5.65	5.30
	AA-	4.40	5.90	6.00	5.90	5.70	5.40	5.20
	AA-	4.30	6.15	6.00 -0.10	5.90 -0.10	5.85	5.60	5.25
	A	4.50	6.05	6.00	5.90		5.60	5.25
	AA-	4.30	5.90	6.05	5.90	5.80	5.50	5.30
Other banks
Bank of China	A	5.50	6.20	6.20	6.15	5.95	5.70	5.35
China Constr. Bank	A	5.50	5.80	5.90	6.00	5.85	5.65	5.40
Co-operative Bank	BBB	4.30	6.05	6.00	6.00	5.80	5.70	5.35
Heartland Bank	BBB	5.50	6.25	6.25	6.20	6.00	5.90	5.80
ICBC	A	5.40	6.15	6.15	6.20	5.95	5.70	5.40
Kookmin Bank	A	4.40	5.60	5.70	6.00		5.00	4.60
	A	5.05	6.15	6.20	6.30	6.10	6.10	5.90
	BBB	4.20	6.10	6.15	6.05	5.95	5.60	5.30
	A-	4.25	5.90	5.90	5.90	5.80	5.50	5.30