Australian Retail Deposits: Forecasts and Opportunities

Table of Contents

1. EXECUTIVE SUMMARY

• 1.1. Deposit growth will hold up despite a lower household savings rate
• 1.2. Key findings
• 1.3. Critical success factors

2. SIZING AND FORECASTING

• 2.1. Retail deposits will reach $1.6tn by 2022
  • 2.1.1. Growth is hard to come by when interest rates are so low
  • 2.1.2. Superannuation will increasingly dominate the retail savings pool, at the expense of other lines of business
• 2.2. Certificates of deposit are in long-term decline due to low rates
  • 2.2.1. Deposits in transaction accounts and instant-access savings or cash management accounts have grown
  • 2.2.2. The shift in deposit products was the result of a convergence in APRs as rates have declined
• 2.3. Regional deposit markets are heavily skewed towards the largest states
  • 2.3.1. The East coast dominates the deposit market, with little change forecast
  • 2.3.2. Total deposit growth is largely dependent upon average deposit growth in such a mature market
  • 2.3.3. All states will see a slowing of deposit growth but Queensland and Western Australia will suffer the most

3. DRIVERS OF GROWTH AND PRODUCT CHOICE

• 3.1. Macroeconomic conditions are mixed, moderating growth
  • 3.1.1. Net saving by households is trending down from its post-financial crisis high and will constrain growth
  • 3.1.2. Consumer confidence has been erratic but remains down from the years of the mining boom
  • 3.1.3. The lack of wage growth in Australia has severely constrained the growth of deposits
  • 3.1.4. A shift towards life stages where assets are run down rather than accumulated moderates growth
  • 3.1.5. Deposit rates, though low, are enough to draw in savings as other asset classes fail to impress
• 3.2. Savings goals have shifted away from new home buying
  • 3.2.1. Contingency funds and holidays are top priorities for savers
  • 3.2.2. Older consumers are a hot market for deposits
• 3.3. Switching rates remain low, making rapid growth a struggle
  • 3.3.1. Switching has never been popular in Australia but is modestly increasing again
  • 3.3.2. The emerging affluent market should be the focus of ADIs’ efforts
  • 3.3.3. Switchers are motivated by an interest in banking and financial management
  • 3.3.4. Personal financial management is becoming a staple of the transaction account relationship

4. COMPETITIVE DYNAMICS

• 4.1. The big four dominate the retail savings market
• 4.2. Commonwealth Bank retains a leading market share
  • 4.2.1. The retail deposit market remains highly consolidated, though smaller players are gaining
  • 4.2.2. Commonwealth Bank retains a leading market share
  • 4.2.3. Consolidation has continued among mutual players
  • 4.2.4. Attracting significant deposits in Australia is usually a function of cross selling
• 4.3. Alternative banks are flooding into the market, making neobanks a growing threat
  • 4.3.1. The Australian market has had little in the way of new entrants for many years
  • 4.3.2. Established ADIs have the edge with security and service

5. APPENDIX

• 5.1. Abbreviations and acronyms
• 5.2. Definitions
  • 5.2.1. Neobanks
• 5.3. Bibliography