SYDNEY – According to Sophie Tilden, Bank of Queensland’s general manager of everyday banking and deposits, the competition between Australian banks for deposits is expected to continue due to various funding pressures.
Tilden stated, “It’s unprecedented times. The deposit competition is absolutely accelerating at the moment, and that’s really as a result of the Term Funding Facility needing to be handed back.”
She added, “We’ve still got a number of the banks actually only just coming up to maturity over the coming months…We think that that race for deposits will continue for some time now.”
Based on RBA data published in September 2021, Commonwealth Bank of Australia had the largest drawdown of the TFF with AUD 51.14 billion, followed by NAB, Westpac, and ANZ.
BOQ ranked 10th with an amount of AUD 2.15 billion drawn down. In its first-half results issued in April, the bank anticipated continued competition in the mortgage and deposit markets, which could potentially impact margins.
To improve its competitive position, BOQ recently launched its ME Bank brand’s digital app ME Go. This upgrade allows all three of its brands (BOQ, Virgin Money, and ME Bank) to operate on a cloud-based core banking system.
Tilden pointed out that this consolidation will help streamline operations and reduce costs for BOQ, enabling it to compete more effectively in the rising race for deposits – one of the most cost-efficient sources of funding for lenders.
Accelerating Growth in Retail Deposits with ME Go
The launch of ME Go on the retail platform introduces three additional funding channels for us to accelerate growth in retail deposits. This innovative digital app enhances our brand’s competitiveness, allowing us to go head-to-head with other digital brands while also providing a viable alternative to major banks.
Westpac Banking Corp Chief Executive, Peter King, recently stated that major banks collectively lost 2.6% market share in household deposits over the past few years. This decline has impacted Westpac’s net interest margin. ANZ Group Chief Executive, Shayne Elliott, expressed similar concerns during an Australian parliamentary committee hearing, emphasizing the inadequacy of deposits to cover lending.
Macquarie analysts further highlight the intensifying competition within Australia’s major banks. They also point out the shift from cheaper transaction accounts to more expensive ones, potentially impacting margins. This shift is underestimated by some investors, according to the investment bank.
In contrast, BOQ showcased impressive first-half results, boasting a 12% growth in customer deposits compared to the previous year. Term deposits, in particular, continue to play a significant role in funding at all banks. Recognizing this, we are focused on building term deposits through our digital platform as part of our strategy.
Overall, ME Go opens up exciting possibilities for us to drive retail deposit growth. With its introduction, we are well-positioned to compete against digital brands and major banks alike.