Ground hog day.


This feels like ground-hog day . Fixed deposit rates on offer by the banks are decreasing further - again. To give you some insight, the 5-year RSA retail bond is now offering 7.75% per annum (nominal rate) - the lowest since April 2018!

AfricanBank is keeping its five year fixed deposit offer at 10.01% pa. This offer still makes headlines & is the most attractive rate out there by a long shot. Their 5-year fixed deposits rates are now +/-2% per annum more than RSA retail bonds. That is a chunky bit of interest. For a R100 000 investment, you would be getting about R15 000 more from AfricanBank.

Is it safe to deposit money into AfricanBank? AfricanBank is a very different animal to its failed predecessor - which had huge exposure to unsecured lending. A major reason AfricanBank is putting so much marketing effort & keeping their deposit rates at these levels is to secure retail deposits. They capital adequacy ratios & overall financial picture is in a muchbetter place now. This was lacking in their previous business, which failed and was ultimately saved by the Reserve Bank. Yet a fixed deposit with ANY bank is never fully secure. Also noteworthy is the Reserve Bank - currently a 50% shareholder - will look to get rid of its shareholding. This was always the plan; but it will be interesting to see the market's reaction to such news. FYI - I personally continue to prefer RSA retail bonds over any banks' fixed deposit.

Stay safe. Walter