Sunday, November 30, 2008
"Banks across the U.S. are engaged in a heated competition for deposits as the battered industry tries to shore up its funding sources. ... The result is a boon for consumers hungry for higher returns as the stock market lurches. But the moves are causing pain for large and small banks across the U.S. by squeezing their profit margins. ... But the scramble for deposits also poses a dilemma for lenders. Banks that don't boost interest rates to keep up with rival institutions will find it harder to attract money that can be funnelled into loans. ... Citigroup's chief financial officer, Gary Crittenden [GC], said the company has a wide array of funding sources world-wide that it can tap. He said Citigroup's high rates on U.S. deposits are worthwhile because they're still cheaper than other types of financing available to the company", David Enrich at the WSJ, 14 November 2008.
Isn't GC smart? Hey Pandit, how much do you pay this guy? Whatever it is, it's too much. Even GC figured out Citigroup is better off paying less than more for deposits. Wow! Interest rates are too low!