Interest offered over guideline

Press, 2 June 1984, Page 3

Interest offered over guideline

PA Auckland The Broadbank Corporation last evening gave notice of seeking deposits at up to 1.75 per cent above the 11 per cent Government guideline. The managing director, Mr T. J. F. Haydon, said the company was not seeking to raise funds to break the lending growth guideline of 1 per cent a month. The company agreed with what the Government was seeking to do in containing monetary growth and inflation, and had gone along with its interest rate controls. However, the introduction of the new savings bonds with a guaranteeed 5 per cent real return to investors directly attacked

Broadbank’s traditional deposit source, he said. Broadbank from Tuesday would offer the public 11.5 per cent for one-year funds and 12.75 per cent for twoyear money, he said. Mr Haydon noted an inflation forecast of 7 per cent in a recent Reserve Bank bulletin that, on top of the bond’s 5 per cent, gave Broadbank only a small margin over the Government gilt-edged security. Broadbank, he said, also felt it must support its investors, about 80,000 of them with average investments of about $40,000. Mr Haydon said that recent developments caused Broadbank, like others, to turn increasingly to the wholesale money market to

raise funds. Rates there were volatile and often high, squeezing margins, and it was not Broadbank’s traditional funds source. In the interests of continued prudential management, he said, Broadbank felt its move to raise deposit rates was necessary to restructure its funds book, even at the expense of reducing margins between the borrowing rate and the lending rate, now limited to a maximum 17 per cent. Company liquidity was good, Mr Haydon said, but it was prudent not to become entirely dependent on the wholesale market. The interest rate offer would be reviewed towards the end of July, he said.