Why don't HSBC offer good rates?

opinions4u

The job of the savings department of the bank is two-fold.

One: Ensure the bank has enough funding to meet demand for lending.
Two: Try to get as many customers to buy products with the lowest rate you can get away with.

If HSBC's demand for lending can be met from existing deposits and wholesale markets, they won't offer headline grabbing rates.

If a bank has a pool of existing savers who have sat there earning a rate of 3% for years, and that bank then encourages them all to move in to a sexy account paying 7%, that bank will turn from a highly profitable concern in to a loss making business very quickly.

I would work on the principle that if the interest rate is above 6%, it's a loss leader for the bank. They will often offer these rates through subsidiaries (e.g. Halifax > IF, or HSBC > First Direct) and launch them as new accounts and not actively draw their existing savers attention to them.

Most of these accounts have a fixed term after which the rate you get drops in to the "profitable" category.

I would always ask the question "what's the risk?" before investing. When you look at Nigerian, Indian and Icelandic banks, their balance sheets actually look weaker than UK banks. They are also having to hedge currency risks when the raise money in Sterling.

The Spanish banks (e.g. Abbey) seem to have stronger balance sheets, but I do wonder why they have had to remain so actively competitive in the 6.5% plus market recently. And with their South American exposure, they may be seen as strong today, but their broader risk profile may not be better over a longer economic cycle.

brookerbabyisababy

Barclays has recently started offering new accounts to customers. All I ask from First Direct and HSBC is that they need to keep getting new customers by offering good rates. You got to remember when these other banks (Halifax or Abbey) do launch products - they also decrease the rates of old products - as a result netting healthy profit from people not checking the decrease in the rate whilst getting new customers with new money into the bank.

Froglet

I cannot fault HSBC ,they have a local bank close to where i work for paying in and cash withdrawals and i use online banking for all my accounts.Their ISA's are 6.25% which is a very good rate,though i know of course that you are limited with what you can put in there.

A mix of other online acounts with other institutions works well with quick transfers from my HSBC current account and i do not worry that i haven't got higher rate accounts with them,they are reliable and have an easy to use website. I don't feel it is a good idea to put all your eggs in one basket anyway.