Monday, July 4, 2011

04/07/2011: New Deposits in Irish Banking

Subprime Lending and the Housing Bubble: Over two previous posts I examined the data for new business loans rates for households (here) and non-financial corporations (here and spreads here). This post covers the deposits – both household and corporate.

Here is what the data on new deposits telling us:

  • Rates for household deposits with agreed maturity have fallen significantly between March 2011 (1.93%) and April 2011 (1.81%). The rates are now below those for the historical average of 2.366% and crisis period average (January 2008-present) of 2.394%. 12mo MA is 1.707%. The volatility of the rates has risen during the crisis from standard deviation for historical period being 0.950 to crisis period standard deviation of 1.155.
  • At the same time, new deposits volumes have contracted sharply for households from €12,333 million in March 2011 to €7,873 million in April 2011. Historical monthly average is €12,636 million and crisis period average is €12,938 million with 12mo MA at €10,079 million. April level of new deposits is the lowest since January 2003 – the start of the series.
  • Rates for non-financial corporations’ deposits with agreed maturity have risen from 1.41% in February and March to 1.52% in April, standing still below the historical average of 2.336% and crisis period average of 2.125%, but well ahead of the 12mo MA of 1.293%. The volatility of these rates has risen sharply during the crisis to a standard deviation of 1.319 from historical standard deviation of 1.036.
  • Volumes of corporate deposits with agreed maturity have declined from €6,720 million in March 2011 to €5,170 million in April 2011. These levels compare extremely poorly against historical average of €13,739 million, the crisis period average of €11,593 million and 12mo MA of €7,277 million.

Lastly, consider the spreads between deposit rates available to the households and those available to corporate clients. Keep in mind that from funding perspective, households deposits are probably less volatile than corporate deposits. Note that standard deviations for the two types of deposits by volume were: historical 3,000.8 million for households against 4,198.09 million for corporates and this relationship remains relatively stable for the period of the crisis.

So the spread on deposit rates for households over and above corporate deposit rates has narrowed to 0.29 percentage points in April from 0.52 pp in March 2011. Historical average spread was 0.03 pp and crisis period average is 0.269 pp while 12mo MA spread is 0.413 pp.

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