Ally, AmEx Among Quickest to Cut Deposit Rates After Fed Moves

(Bloomberg) -- Online banks have been more aggressive than their established rivals in attracting customers with high deposit rates. Now that rates are falling, they’re quicker to cut as well.

Ally Financial Inc. and American Express Co. lead the pack in lowering rates across deposit products, Credit Suisse Group AG analysts led by Moshe Orenbuch said in a note Monday. Ally cut the rate it offers on consumer savings accounts by 0.3 percentage points from its peak rate, AmEx by 0.2 percentage points.

Online lenders have offered higher savings rates instead of access to branches as they try to lure depositors away from bigger competitors, and that spread widened as the Federal Reserve hiked interest rates in recent years. That advantage may shrink after the Fed cut rates in July and faces expectations for another reduction this month. Most online lenders have lowered rates across all their savings and certificate of deposit accounts, the analysts said.

Read more: Goldman’s Marcus lowers rates

The quick moves by Ally and AmEx will likely lead to drops of more than 10 basis points in the cost of deposits for each of them in the next quarter, the Credit Suisse analysts said.

Banks still transitioning from physical branches to online banking have been slower to reduce rates and will see less cost-saving results, according to the report. Credit Suisse said Capital One Financial Corp. and CIT Group Inc., both of which get only about half of their deposits from online banking, would see the least cost reduction from deposits next quarter among the seven lenders the analysts reviewed.

To contact the reporter on this story: Gwen Everett in New York at geverett10@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub

©2019 Bloomberg L.P.