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A Jump in Rates Could Trim AmEx, Discover Deposits
NEW YORK and WASHINGTON (1/8/14)--A report released Monday by Fitch Ratings said rising interest rates put American Express Co. and Discover Financial Services among the financial firms more at risk of losing customer deposits than traditional banks.
 
It was these lenders unencumbered by branch networks that best drew deposits in recent years with rates higher than their competitors, the report said. But, it added, those new customers may not be inspired by any loyalty to stay put when rates climb elsewhere. (Bloomberg Jan. 6).

"Large firms that have attracted deposits with high rates online are the most exposed to outflows when interest rates rise," explains Credit Union National Association Chief Economist Bill Hampel. "Fortunately, credit unions have much deeper relationships with their members."
 
He said credit unions will experience slower savings growth, but nothing like these large firms. Also, he added, credit unions will have to be on the lookout for intense rate competition from some of these large institutions.
 
But even compared to traditional banks, the Fitch report predicted American Express and Discover may see deposits leaving to a greater degree "given that their deposit platforms are relatively new, tend to lack deep, long-term customer relationships and are predominantly centered on gathering deposits online."


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