Wells Fargo posted a first quarter profit today that exceeded analysts expectations. CFO Howard Atkins came right out and said it was because they are no longer paying high rates on deposits. Bloomberg states:
"Margins are better because of the competitive situation” after many of the “irrational players” were eliminated, Chief Financial Officer Howard Atkins said in a telephone interview. The bank’s net interest margin, the spread between what it pays depositors and receives on loans, was about 4.1 percent in the first quarter, compared with about 3.10 percent in the fourth quarter and 4.7 percent in the same period a year earlier.
Wachovia paid extraordinarily high rates to attract deposits last year, Atkins said. He also said that many of those accounts now are running off, which should benefit Wells Fargo’s profitability later this year.
Wachovia did have competitive rates last year that benefited savers. Since then, the Fed has dropped rates to 0%, bringing down bank deposit rates. As the spread between deposits and mortgage loans has widended, banks have reaped a windfall. Savers are getting a double whammy, paying for saving the bank via TARP and also subsiziding them via low deposit rates. At least mortgage rates have come down a bit although credit rates continue to remain high and even rise.
As a saver, you can make the best of a tough situation by choosing to deposit your money in a bank with a competitive interest rate.
Delta Community Credit Union is a state-chartered credit union, organized under the Georgia Department of Banking and Finance and federally-insured by the NCUA. It was originally organized to serve Delta Airline employees, but it now serves many other groups.
The credit union has a history of competitive rates on CDs, IRA CDs, HSAs, checking accounts and money market accounts.
Its field of membership includes members of the GettingAhead Association, an association that anyone can join with a small membership fee. Credit union membership is also open to employees of many companies and residents of several Georgia counties.
I just got 2.5% on a money market from the Citibank branch on Boylston Street in Boston. I don't know if the rate is national but here are a few things I learned in the process.
I just got 2.5% on a money market from the Citibank branch in a suburb of Boston. I don't know if the rate is national but here is something I learned in the process about "new" money."
The minimum deposit was $25,000 which was fine because I had to roll-over about $100,000 from a maturing CD. I had $50,000 coming due at Citi and $50,000 at another bank. At first they told me the 2.5% rate was only for new money which was ridiculous. I was going to have to remove the $50,000 I had at the bank and replace it with another $50,000. The woman at the bank also admitted there was nothing stopping me from taking the money, depositing it in another bank for a few days, and then brining it back. No wonder these banks are having problems!
Eventually they relented and told me I could deposit the full $100,000, new money be damned. So there's a lesson for everyone. The banks may say new money but it's awfully difficult to enforce and when push comes to shove, most will relent.
