Banks pay more for jumbo deposits
In recent months the banks have switched gears in their pursuit of household accounts. Israel's major banks have been opening branches, launching new service centers and trumpeting their advanced technologies in an effort to improve their services to small clients. All this lollygagging may sound nice, but the bottom line is that the small clients are still paying more than the big ones.
The man on the street may be being pampered with more spacious and aesthetically designed branches, but will also be paying dearly for them. A survey by TheMarker found that the banks' jumbo clients, who usually visit the private or business banking departments, receive more than double the interest on their deposits than "regular" retail customers.
Thus a deposit of millions of shekels by a jumbo client earns 1.8% annual interest, while a regular client who deposits only a few tens of thousands of shekels, earns just 0.7% interest.
A jumbo client who leaves his money in the bank for six-months will receive 1.42% annual interest, while the average customer will receive only 0.65%.
The disparity in the interest rates for shorter periods of a week or a day is even greater. A regular deposit for one week earns 0.15% interest, while a jumbo deposit earns over 10 times that figure - 1.62%. Daily interest on jumbo deposits for a week is slightly lower, at 1.57%, but on a regular deposit is slashed to just 0.05%.
TheMarker's survey also found that the difference between the interest rates has widened since the economic downturn.
Until September 2008, jumbo depositors earned about 1.5 times the interest of regular depositors. Like many other things, interest rates on deposits are flexible, and a chat with your banker can get you a better rate.
By the way, in a report released yesterday, the Royal Bank of Canada predicted that bank stocks in the west aren't done falling yet. But the banks sector analyst also predicts that the share prices of western banks will bottom out in 2009. "The only question is when," writes RBC.
Meanwhile, banks will have to cut dividends, especially the banks that accepted taxpayer-funded aid. Apropos of which, RBC believes the governments will have to shovel more into the banking sector in order to cure it.
Another RBC prediction is that following the meltdown of the global financial system, Washington will crack down on banks with stifling regulations, which will constrain growth and profitability.