We look at the make-up of bank deposits, especially those held by households, and find these balances growing surprisingly quickly

Banks hold $315 bln in deposits from customers. This is a review of who has those claims on our retail banks.

New Zealand interest rates may seem low to us, but they are relatively high by western world standards. And non-residents are attracted to them. But perhaps not as much as you might think, although it is not easy being a non-resident and holding a New Zealand bank account.

However, non-residents do hold $25 bln in term deposits and at-call savings accounts. (70% of these balances are held by non-resident households; institutions find other, non-bank ways to invest in New Zealand.)

But resident households are by far the largest holders of bank deposits – and these balances are growing quickly.

In the year to August, household deposits at banks grew +7.6% to $161.8 bln and that is the fastest growth rate in a year and the fastest growth amount (+$11.5 bln) since June 2016. It is an impressive level of growth and the fact that it is picking up in both rate and amount is also impressive given the fall-off in residential real estate transactions which might have been the first assumption as to why this is happening. Clearly there is much more to it than that.

In fact, the +7.6% growth in deposits is faster than the +6.5% growth in bank mortgages over the same period – in fact faster than any loan growth for any other sector of the economy (business, agriculture, personal consumer, etc.) We weren’t expecting to find that.

This data is available in the RBNZ’s new S40 data that allows us much closer inspection of this aspect of bank balance sheets. But this new detail doesn’t have history earlier than for December 2016 although the aggregated totals go back to 1998.

This, then, is how that $315 bln is made up by both the claimant groups (households, businesses, Government, etc) and where each has allocated its holdings (transaction accounts, at-call savings accounts, term deposits).

as at August 2017 Total   Transaction Savings Term
  see chart below   accounts accounts Deposits
NZ$ bln $ % $ $ $
Households (see chart below) 161.8 51.4 21.8 50.7 89.4
Finance businesses 32.3 10.2 8.4 4.9 19.0
All other businesses 76.6 24.3 23.8 21.5 31.2
Government 9.8 3.1 3.1 0.6 6.0
Not-for-profit organisations 4.0 1.3 0.8 0.9 2.3
Non-residents 30.4 9.6 5.2 4.9 20.2
  ====== —– ======= ======= =======
Total bank funding 314.8 100 63.1 83.5 168.1

An easier way to visualise who has this money is by this chart:

And that $161.8 bln household deposit base is made up like this:

These are the balances that are growing +7.6% per year. But the data is not deep enough yet for us to know which of these three components are attracting the growth.

And given that deposits are growing faster than loan demand, perhaps it is not surprising that banks don’t feel any need to raise their interest rate offers.