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Westpac deposit discrepancies: what are they doing?

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Thanks for saving me the trouble, Bill.

communique said:
Only one problem - the government guarantee was only put in place for a period of 3 years. We are already one year into it.
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Good point, communique.
 

I was under the impression that an interest rate of 7.8% fully franked s***s all over 8% (7.8% F.F. =approx 11%), the 8% does compound though, but i guess u can put your hybrids dividends in a high interest savings account and get a compound effect. And u get an additional 6% on maturity. Also the hybrid interest rate will move with the interest rates, i am under the impression that they will increase by a nice margin in the next 18-36 months.

Are hybrids in SUN really that much riskier than a term deposit in SUN? The government guarantee will only last for the first 2 years of the 5 year term deposit.

I am having trouble why u guys seem to think that the term deposit is a better investment than the SUN hybrid.
 
All the points you make are valid. As I said in the original post, it is all about risk.

OK, there are some very credible high profile economists out there saying the next banking crisis will hit mid year 2010. Lets say this is true and mortgage defaults are flooding in and property developers get into trouble and Suncorp can't cope and go under then the person with the Government guarantee is protected (for 2 years) all the hybrids and shareholders would lose everything, that is as bad as it could get. Risk versus no risk is what it is all about. The first question you should ask yourself when investing in anything is, is my money guaranteed and can I cope with losing everything should the company I invest go under? By the way I am currently receiving receivership payments from a "safe and secure" company that went bust. It does and possibly could happen.
 
Alternatively SUN does not go bust but does make some losses and unable to pay dividends and the hybrid interest. Hopefully it doesn't happen but it can happen like PaperLinx although they don't do banking.
 
I may be slightly stupid but then maybe not.

Don't you think there would be a reason why a bank is offering you a fixed rate at 8% for the next 5year.

Obviously they do need a good fixed balance for some time however I would find it hard to believe that 8% which is well above the current RBA rate is there for any other reason then the banks believe in the long term rates are going to be significantly higher.. I wouldn't be surprised to see 10-14%

Any way thats just my thoughts.
currently happy getting my 5.51% e-saver
slightly less then the good 8% however I happy to wait it out another year.

This is my opinion nothing else, please correct me if required.
 

Another point not noted by other replies is that rates for Hybrids are normally quoted INCLUDING the FF amount. So depending on your tax rate, hybrids can have different return outcomes. 7.8% is really 7.8% max

Also coupon is quoted on issue price..ie 7.8% on $100, so actual div is higher percent now based on $7.80/$65 price.

Various term deposit offerings at 6.8% for 12 months are good value imo

I prefer to buy hybrids at discount rate, not issue price.

The planets lined up recently for hybrids, with raising interest rates, low term dep rates and credit ratings improved following a big selldown, picked up some showing 8-10% yield, now sitting on 20-30% gains, party is mostly over now though

would be reluctant to lock much cash up for 5 yrs as the guarentee will be finished before then, even though if its ever needed we will all be stuffed anyway
 
awg said:
would be reluctant to lock much cash up for 5 yrs as the guarentee will be finished before then, even though if its ever needed we will all be stuffed anyway
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That's quite right, awg. Before the GFC I don't think it occurred to many of us to think the government should be guaranteeing bank deposits in view of the general stability of our banking system, and the seemingly diligent role of APRA.

The government guarantee was, imo, a purely political and social move to prevent unjustifiable panic at the time. As such it was a good thing to do.

Agree with you about locking up much cash for that period of time. I've only done it with the proportion that I always keep in cash.
 
You could be right. I'm more inclined to think that the banks currently offering higher rates have a need to bring in X amount of funds to balance their books. Then when they've achieved that level, the offer will be withdrawn.

For a while CBA was matching every offer Westpac made, but they stopped that about three or four weeks ago. To me, that reinforces my theory, as I'd guess more people would deposit funds with CBA than with WBC if all other things are equal.
 

Was down in Manly on Saturday and walked past the Westpac Bank there, it seems they have pulled the plug on the 8% for 5 years. There was a big sign in the window showing it's only 7.25% "special" rate now for 5 years. Good on ya for getting it while you could, cheers.
 
That's interesting, Bill. I've just checked the St. George website and they have done the same. They must have filled their current requirement for cash.
 
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