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POSTED
ON BY Ken Tumin
This Wall Street Journal article describes another issue in addition to the credit crunch that's hurting banks. Competition for deposits among banks remains intense, and this is reducing the interest margins between banks' loan and deposit rates. The most affected are small and midsize banks which tend to rely on this for much of their profits. Larger banks can derive more income from other areas like investment banking.
The article mentioned both Countrywide and E*Trade as two banks that have been hit hard by the credit crunch but are still offering some of the highest savings and CD rates. This puts pressure on other banks. I just saw an example of this when a reader recently emailed me that he was able to get a WaMu branch manager to match Countrywide's 5.50% 6-month CD.
The article didn't mention how the internet is helping to put pressure on banks to keep deposit rates high. With the information on the internet combined with how the internet can make it easy to move money, banks are going to have to compete for our money.
Thanks to the reader who mentioned this article in the comments.
The article mentioned both Countrywide and E*Trade as two banks that have been hit hard by the credit crunch but are still offering some of the highest savings and CD rates. This puts pressure on other banks. I just saw an example of this when a reader recently emailed me that he was able to get a WaMu branch manager to match Countrywide's 5.50% 6-month CD.
The article didn't mention how the internet is helping to put pressure on banks to keep deposit rates high. With the information on the internet combined with how the internet can make it easy to move money, banks are going to have to compete for our money.
Thanks to the reader who mentioned this article in the comments.