Deposits humming for banks

In explaining the agreement for Macquarie to sell its margin lending business to Bendigo and Adelaide Bank yesterday both banks took time to highlight recent deposit flows.

Macquarie, which confined its commentary to a statement, said it experienced a 27 per cent increase in retail deposits to $11.9 billion over the three months to December, a figure that must include business deposits, given corresponding APRA data, and also since that's where Macquarie sources most of its deposit funding.

Jamie McPhee, chief executive of partner-advised banking at Bendigo, said the bank experienced retail deposit inflows of between half a billion and a billion dollars a month each month for the last nine or 10 months.

McPhee also noted that the bank had plenty of warehouse capacity on hand to fund mortgages but implied that the bank was unlikely to draw on this given the lower returns in mortgage lending.

Asked on a conference call about capital ratios, McPhee said Bendigo would continue to target a ratio in the high seven per cent to low eight per cent range.

McPhee warned against "lazy capital" - given the current investor interest in banks with very high capital ratios - and stressed the need to put capital to "productive use".

Meanwhile Macquarie created a minor flap yesterday with the publication of a brief outlook statement that noted "exceptionally challenging" market conditions.

The bank said it had offloaded $12 billion of a target of $15 billion in balance sheet assets (including the margin loan book) and that it expected to achieve the balance by the end of its financial year at March 2009.

Macquarie reported a 43 per cent fall in interim net profit from $1.06 billion in the September 2007 to $604 million in the September 2008 half and said it expected to broadly match that result during the March 2009 half, though the bank must be preparing for a lower result than that.