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POSTED ON BY Ken Tumin
This US News article on EmigrantDirect doesn't mention the latest problems of Emigrant's website upgrade, but it does have some new insights into Emigrant's online growth and why it may have been downgraded by Bankrate.com to 2 stars. Here's a quote from the article:
Perhaps Emigrant was hoping to bring in more loan money from its cash back credit card. I hope it can find a way to grow loans so it can still be able to offer high rates on the savings accounts and still be profitable. There's going to be pressure to lower the rates if profits decrease.
Website Update
I've been able to log in okay for the last several days, but the site still seems slow to me. The new account numbers at EmigrantDirect don't seem to have an effect in regards to old links. I've confirmed that my old link from HSBC savings to Emigrant savings still works. I pushed money from the HSBC account to Emigrant without problems. I've seen others confirm this also.
I've heard some people having problems creating new links from EmigrantDirect. The trial deposits could not be verified at Emigrant.
The second problem many banks are now facing is what to do with all the new money. Milstein says Emigrant has originated loans on only about $2.5 billion of the nearly $7 billion taken in by his Internet arm, with the rest sitting in low-yielding short-term investments.
The bank saw its deposits increase from $6.1 billion to more than $10.6 billion in the 12 months from March 2005 but saw its net loans on those deposits increase by less than 12 percent. Meanwhile, its cost of funding those deposits increased, lowering the bank's return on equity for shareholders from 23.69 percent to 13.7 percent.
Perhaps Emigrant was hoping to bring in more loan money from its cash back credit card. I hope it can find a way to grow loans so it can still be able to offer high rates on the savings accounts and still be profitable. There's going to be pressure to lower the rates if profits decrease.
Website Update
I've been able to log in okay for the last several days, but the site still seems slow to me. The new account numbers at EmigrantDirect don't seem to have an effect in regards to old links. I've confirmed that my old link from HSBC savings to Emigrant savings still works. I pushed money from the HSBC account to Emigrant without problems. I've seen others confirm this also.
I've heard some people having problems creating new links from EmigrantDirect. The trial deposits could not be verified at Emigrant.
2.) A bank wishes to raise its profile/expand its loan book. I think Emigrant is doing this. They obviously want to keep the deposits as they continue to raise the APY to beat their competitors. This suggests they are going to expand their loan book either organically or through some sort of merger. I'd guess it will be organic. The card is certainly one part.
---Banks are very attractive to credit card companies at this point. Emigrant might be even looking for a reverse takeover by an established player. I think mostly, though, Emigrant wants to use the deposits to expand existing operations.
Honestly bankrates star system is POINTLESS. The moral hazard that FDIC creates ensures that the bank will not fail. This is not the insurance part really but the fact that FDIC gets on banks when they start to look weak. They force banks to take corrective actions. And the fed discount window is always open:)
About Bankrate's star system, I did find one use for it besides for those with large deposits. It does seem to have an impact to the value of brokered CDs.
2. Emigrant (and ING before it) made FOOLS out of the big players like HSBC and Citi through high interest online accounts. Emigrant is now a national brand while the big ones play catch up. (On top of that HSBC has an absurdly complex log on procedure, while Citi's account has too many strings.)
3. The Bankrate.com star system needs to be more fully documented for me to interpret it...
4. The Emigrant credit card rewards frankly suck versus many competitors. I've got several no fee special purpose 5% rewards cards (Citi is best overall). When the cards are used together I can regularly achieve close to a 3.5% reward rate for all purchases. There's no need to be tied to Emigrant's minimum deposit either.