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ING appears to want to be more like RBC
March 5, 2014
11:15 pm
GS1
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This evening Cannex showed ING's Savings account rate had moved from 1.35% to 1.3%. This is getting closer to my 1.25% rate at RBC DI. I looked at my RBC HISa rate and find they have moved (quietly) to 1.1% so it appears that, unlike gas prices, rates are going down.

I looked here at 2:00 am EST and the ING rate still shows as 1.35% but on my account page it has been changed to 1.3%.

GS

March 5, 2014
11:38 pm
Doug
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Interesting move by Tangerine. I expect PC Financial, which moves in tandem with Tangerine (and we should start calling it Tangerine now), to follow suit.

The fact is, banks are generally still awash in capital both from the retail banking as well as wholesale funding sources. Lending has slowed and the lending growth they are seeing is in the much higher margin credit card & automobile financing with their premium rates (true, they do have higher loan loss rates historically, but the net interest margin is that much greater). Unless we see dramatic lending growth across the board, the banks are essentially having their cake and eating it too (they can essentially raise deposits at sub 1.25% and lend, in the growing areas mentioned, at anywhere from 9 to 22% and even mortgage rates are marginally ticking higher). Essentially, if they don't need to raise capital and can still attract deposits at even lower rates, why wouldn't they? Bad for savers; good for banks and bank shareholders! ;)

In short, I fully expect we'll see continued downward pressure on deposit rates through the end of 2014 before starting to tick upward in mid- to late 2015, I think. I think you'll see the "Big 5" banks drift their highest savings account rates down to 1%, Tangerine/PC Financial/Canadian Tire/ICICI Bank "group" down to 1.25% (in line with the Hollis Canadian Bank and BNS investment savings account rates, net of trailer fee of 25 bps), those banks currently at 1.75% or lower will drift down to 1.5% and the less capitalized banks will drift things down to 1.75% so that no bank/credit union in Canada will offer a rate above 1.75% by year end. There will still be "teaser" promotional rates, but with the lowered "base" rates, they can still effectively increase their margins on the deposit ends, coupled with the moderate increase in mortgage lending rates.

As lending rates continue to rise in mid-2015 and the Bank of Canada likely increases its "prime" rate in late 2015 or early 2016, you'll see deposit rates start to tick up, but to further increase margins, I think you'll only see deposit rates go up once for every second time the Bank of Canada boosts "prime".

That's why, I think rising interest rates will actually be superbly profitable for the Canadian (and indeed, foreign) banks. Not only have they wringed fairly substantial sustainable cost saves out of the business (i.e., operational, I.T. and interest margin), but they'll see continued margin expansion. :)

Cheers,
Doug

March 6, 2014
8:09 am
Peter
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Their TFSA rate is also down from 1.40% to 1.30%

March 6, 2014
9:12 am
AltaRed
BC Interior
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GS said

I looked at my RBC HISa rate and find they have moved (quietly) to 1.1% so it appears that, unlike gas prices, rates are going down.

GS

Not sure where you are looking, but http://www.rbcroyalbank.com/pr.....ducts/isa/ still shows 1.25% this morning.

March 6, 2014
9:49 am
GS1
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AltaRed said

GS said

I looked at my RBC HISa rate and find they have moved (quietly) to 1.1% so it appears that, unlike gas prices, rates are going down.

GS

Not sure where you are looking, but http://www.rbcroyalbank.com/pr.....ducts/isa/ still shows 1.25% this morning.

AltaRed -- sorry for any confusion.

RBC DI (Royal Bank Direct Investing) offers a quasi mutual fund called RBC Investment Savings Account that trades under fund code RBF2010 for the Series A and that is offering 1.25% and is the link you offered.

RBC (Royal Bank retail banking) offers a High Interest Savings account and that is what I was referring to that has slid downward to 1.1% as is described here.

I am sitting with a significant pile of cash in the RBC retail banking HISA and today will be moving it to RBC DI's RBF2010 fund. The difference is $1.50 per $1000 annually and for small amounts is likely not worthwhile.

(And, yes, SD2013, I do lose the CDIC protection.)

Greg

March 6, 2014
11:03 am
AltaRed
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GS said
RBC (Royal Bank retail banking) offers a High Interest Savings account and that is what I was referring to that has slid downward to 1.1% as is described here.

Greg

Okay, understood. I thought that eSavings account has been at 1.1% for 'ages'... certainly months best I can tell (my SO had some money in that one for some time).

March 6, 2014
7:39 pm
Loonie
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I am crossing my fingers that perhaps this trend will be isolated to ING due to it being owned by Scotia, but Doug's analysis may be correct, if depressing.

March 7, 2014
10:12 pm
Peter
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I've split the discussion about RBC into this other thread. This current thread can remain for any further discussion about ING Direct's rate change.

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