Banks Aggressively Seek Deposits
Banks are also feeling the pressure to raise deposit rates and reduce account fees to attract cash, and that will continue in 2005, as many expect the Federal Reserve to steadily increase rates.
Doyle Arnold, chief financial officer at Salt Lake City's Zions Bancorp., said in January that he expects "we'll see more than half of the tightening passed through in the form of increased rates on deposits," according to The American Banker, an affiliate of The Credit Union Journal. Zions raised interest rates on money market accounts by 20 basis points in the fourth quarter.
San Francisco-based Union BanCal Corp.'s deposits increased at the end of last year because of lower account fees and higher rates on deposits, The American Banker said. Minneapolis-based U.S. Bancorp plans to increase rates on money-market accounts, interest checking accounts and CDs, it added.
Through most of 2004 executives held deposit rates stable amid four Federal Reserve interest hikes that took the federal funds rate from 1% at the start of 2004 to 2% at the close. As 2004 neared its end, a number of major banks yielded to pressures to raise rates and cut fees, The American Banker said.