ING Direct is the recent star of the deposit market in Australia, with the Dutch-owned bank staging a notable recovery in volumes in recent months after a mild, but apparently expected, slump in the middle of the year.
APRA data on household deposits for October show that ING Direct recorded a net gain of $646 million, or four per cent, in its deposit book over the month.
A special promotional interest rate 85 points higher than the ING Direct standard rate was introduced in late August, applicable for new deposits until the end of the year.
The ING Direct deposit book fell 7.5 per cent from $16.2 billion in March to $14.9 billion in June during a period of increasingly competitive rates and the changed rules on superannuation. ING Direct's deposits then steadily recovered market share, building its book to $16.9 billion by October, a 12.8 per cent increase on the June low.
Of the five major banks, only Commonwealth Bank recorded a higher level of inflows at just over a billion from a deposit book five times that of ING, for an increase of just over one per cent.
Rabobank, which is a new entrant in the arena of high yield savings, recorded growth of six per cent for the month but off what remains a very small base. Rabo's household savings remain at less than $600 million.
Of the bigger banks NAB and St George matched CBA's growth rate in household deposits with both growing in line with the banking system over October.
BankWest, as a former price leader in the high yield segment, recorded much more subdued growth over the month.
Total household deposits stood at $323.7 billion at October, up 1.2 per cent on September, 6.9 per cent on June and 6.6 per cent on March.
The 7.5 per cent decline in ING Direct's deposit book for the June quarter can be largely attributed to investors moving funds into superannuation to take advantage of the tax incentives before the 30 June deadline.
BankWest experienced a similar pattern of investor behaviour with deposits down almost six per cent for the June quarter, and for the four months to October has experienced 7.4 per cent growth.
The overall market total was flat for the quarter to June, as the bigger banks have a much more diversified range of deposit and transactional accounts that would be included in the APRA data, compared to the sole ING high interest deposit account.
"Superannuation impacted us significantly, and we expected it to," said Lisa Claes, ING Direct's executive director direct sales and operations.
"No one could tell us the extent to which it would, but our analysis showed that the money outflows were consistent with depositors from a demographic that was able to take advantage of the superannuation legislation tax incentives."
Claes said that the strong September inflows were driven by the current extensive ING marketing campaign for all products, and the ING Direct marketing campaign promoting the 85-point increase for new deposits, which began in late August.
"Growing our deposit book has a dual benefit for us particularly at the moment considering what is happening overseas with the credit squeeze.
"We are committed by principle to growing our deposit book."
Claes said, "Rate is a factor in driving deposit growth, as is a well known strong and trusted brand.
"We have run similar but not identical campaigns before, and experienced similar levels of success.
"There are a lot of competitors paying higher rates than they were two or three years ago, which has had some impact (on book growth) but we have been prepared to fight back when necessary."
Some of these 'competitors' are offering higher rates than ING Direct for more strategic business purposes.
Rabobank's online offering RaboPlus has the same structure as ING Direct, currently paying a 25 point premium on the promotional rate, with the main objective to attract deposits to help expand the bank's Australian agribusiness lending arm.
Citibank's differently structured at-call account currently returns 7.25 per cent, ($5,000 is required to be kept in a non-interest accruing account) targeted at customers with close to $50,000 to invest, with the high interest carrot acting as a vehicle to attract investors to the bank, where a wider suite of financial products can then be offered.
ING Direct is currently paying a promotional rate of seven per cent until the end of the year for new customers, and existing customers' balances are above what they were on the 28 August.
On conclusion of the promotion, funds will receive the standard 6.4 per cent return.