Annual interest of 3.6pc expected to put the pressure on smaller local lenders
Citibank has aggressively increased term deposit rates through a promotion that will increase the struggle between small- and mid-sized lenders to secure stable funding sources and step up the battle for new customers.
By paying an annual interest rate of 3.6 per cent on deposits of at least $100,000, tied up for six months, the US bank is offering the highest rate in the market, said observers.
Fierce competition for deposits means that Hong Kong banks are looking to secure funding, especially with tenors between one and three months, said Brian Cheung Nam-chung, senior manager at Liu Chong Hing Bank.
'The US Federal Fund rate is expected to rise another 0.75 percentage point by the end of the year and lenders want to lock up cheaper funding in advance,' he said.
Mr Cheung noted that some banks - including Liu Chong Hing - had periodically offered depositors rates of 3.5 per cent to 3.75 per cent for deposits over $1 million.