Bank's rates give saving an added interest

Competition on savings account interest rates looks set to heat up, with rural lending specialist Rabobank charging into retail banking this week offering a market-beating 7.35 per cent.

The New Zealand subsidiary of the Netherlands-based global giant is touting its new RaboPlus brand, offering online savings, term deposits and access to managed funds as "the bank you have on the side".

"You don't switch all your banking requirements across," said RaboPlus general manager Mike Heath.

"You just do all your savings and investments through RaboPlus. You keep your mainstream bank for your cheque book, your ATM and credit cards and mortgage, but you bring across your savings and investment needs to RaboPlus to earn the highest returns in the market, and no fee structure."

RaboPlus' flagship product is its on-call savings account featuring no fees, no minimum balance and unlimited transactions. At 7.35 per cent, its closest competitor is Kiwibank's On-line call account which offers 7.20 per cent but with a $2000 minimum deposit. Superbank, rumoured last week to be an acquisition target for Rabobank, offers 7.15 per cent with no minimum deposit.

The publisher of interest.co.nz, David Chaston, said: "What we're seeing here is a market connection strategy.

"These online call accounts are fast ways to get lots of customers. Their primary emphasis is to connect with as many people as they possibly can up front."

Chaston said the strategy had worked well for Superbank, which had got about $250 million into its system "in pretty short order".

Rabobank Australia and New Zealand chief executive Bruce Dick said while Rabobank was a niche player in Australasia, it was the strongest online bank in Europe.

Dick said there were opportunities for RaboPlus in the "large pool" of retail deposits in New Zealand.

Rabobank's AAA credit rating - better than the New Zealand Government's - means it can access funds relatively cheaply, yet Dick said there was still attractive value in taking deposits from New Zealand retail customers.

Massey University head of banking studies David Tripe said that, as an online bank, Rabobank's low overheads meant the administrative cost of taking deposits would be very low, "and they've got an existing loan business that they can use the funds for".

With a loan book of $4 billion to $5 billion, Rabobank is the third largest rural lender in New Zealand but is the fastest growing. It also has some corporate and wholesale lending.

Dick refused to comment on rumours that Rabobank planned to buy Superbank, which co-owner St George Bank has said it wishes to exit.

LOGGING ON

* Rural lender Rabobank is entering retail banking with internet-based high interest savings, term deposits and investments.

* It says competition among banks in that space is soft.

* Its flagship on-call savings account offers 7.35 per cent with no minimum deposit.

The nearest competitors are:

* Kiwibank On-line call: 7.20 per cent, $2000 minimum deposit.

* Superbank's Supersaver: 7.15 per cent, $1 minimum deposit.

* ASB: 7 per cent, $1 minimum deposit.

* BankDirect: 7 per cent, $1 minimum deposit.

Data courtesy of interest.co.nz