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.
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.