You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

There are many variables to fixed deposits

A comparison of interest rate offerings across the big four banks.

CAPE TOWN – Nedbank is currently advertising a rate of 7.49% on its 12-month fixed deposit. Given that it’s being widely promoted, one might assume that this is a good offer. Before rushing off to your nearest Nedbank branch however, it is worth putting the rate in context.

In a couple of respects, it is actually very good. Only one other local bank is offering a higher rate over 12 months, and that is Standard Bank, which is currently running a promotion that ends on October 31. A 12-month fixed deposit there is currently attracting 7.55%.

Other banks are offering as low as 6.25% for fixed deposits over the same term. This makes Nedbank and Standard Bank’s offerings very attractive.

It’s also worth considering that this rate compares very favourably to the current yields on multi-asset income unit trusts. According to figures from Morningstar, the highest yield achieved by any fund in this category over the past 12 months was 7.63%, and it is one of only two funds with a yield above 7.5%.

While these are historical yields rather than the guaranteed future yields offered by a fixed deposit, they nevertheless give a fair idea of what you might expect to earn off these funds in the next 12 months. The category average is also just 5.6%.

Multi-asset income funds do also have the potential for capital appreciation however, and so in some cases their overall return is higher. According to Morningstar, the category average total return is 7.16%.

It’s worth bearing in mind though that where there is a chance of capital appreciation there is also the risk of capital loss. And a few of these funds have shown negative capital growth over the past 12 months.

If you have money that you know you will only need in a year and need to keep it somewhere safe, a fixed deposit with Nedbank or Standard Bank is therefore not a bad choice right now. At effectively zero risk, that level of return is attractive.

Don’t, however make the mistake of assuming that because these two banks are offering good rates over 12 months that their longer-term deposits are similarly appealing. Quite the contrary. Apart from its 12-month rate, Nedbank’s fixed deposit rates are by far the lowest currently on the market.

In a comprehensive survey of fixed deposit rates across the big four banks, Capitec and Investec show that anyone wanting to place a fixed deposit should thoroughly examine all their options first. Where you find the best rate will depend on the amount you want to put away and the term you are looking at.

You also need to be sure you understand the rate that your bank is offering you. Banks talk about both nominal and effective rates, which confuses the issue.

Nominal rates are generally quoted if you intend taking the interest during the term. In other words if you want it paid to you monthly, quarterly or even annually. You will be given the effective rates if you intend to only take the interest on maturity.

This can be very confusing because effective rates are not compounded. In other words, you only ever earn that rate on the initial amount, not on reinvested interest.

This makes rates difficult to compare. The best approach is therefore to ask your bank to quote you an estimate of how much interest you will earn as a rand amount rather than as a rate.

The below tables show the rates banks are offering on fixed deposit amounts of R10 000, R50 000 and R100 000. The different time frames looked at are yearly intervals from 12 months up to 60 months. Where they were provided, both nominal and effective rates are given.

The only definitive way to compare the products however is to use the amount of interest that you will earn. The interest you will earn if you only take it at the end of the term is therefore listed, although these are only estimates as they may be affected by factors such as a leap year or rounding.

These tables take some scrutinising because depending on the amount you have to invest and your time frame, your best option will differ. Over a full five year period, Capitec offers the highest return on any amount, but it is amongst the lowest if you are only looking over a single year.

Standard Bank comes out tops over 12 months and 24 months, however the current promotion that it is running is only available for another week. After that Nedbank’s rates would probably start to look more attractive over 12 months, and Capitec for any period longer than that.

Investec doesn’t accept deposits for any amounts below R100 000, so no figures for lower amounts are shown.

 

Capitec

 

R10 000

R50 000

R100 000

 

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

12 months

6.25%

R 643

6.70%

R 3.455

7.10%

R 7.336

24 months

6.90%

R 1.475

7.50%

R 8.065

8.05%

R 17.405

36 months

7.65%

R 2.571

8.00%

R 13.512

8.50%

R 28.930

48 months

8.00%

R 3.757

8.50%

R 20.163

9.00%

R 43.141

60 months

8.50%

R 5.273

9.00%

R 28.284

9.50%

R 60.501

 

Absa

 

R10 000

R50 000

R100 000

 

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

12 months

6.75%

R 677

6.75%

R 3,384

6.75%

R 7,270

24 months

6.84%

R 1,370

6.84%

R 6,849

6.84%

R 14,800

36 months

7.33%

R 2,201

7.33%

R 11,005

7.33%

R 23,512

48 months

7.35%

R 2,942

7.35%

R 14,710

7.35%

R 32,022

60 months

8.76%

R 4,385

8.76%

R 21,924

8.76%

R 46,351

 

 

Nedbank

 

R10 000

R50 000

R100 000

 

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

12 months

7.25%

7.49%

R 751

7.25%

7.49%

R 3,755

7.25%

7.49%

R 7,510

24 months

5.11%

5.24%

R 1,049

5.11%

5.24%

R 5,247

5.11%

5.24%

R 10,494

36 months

5.22%

5.49%

R 1,649

5.22%

5.49%

R 8,242

5.22%

5.49%

R 16,485

48 months

5.22%

5.51%

R 2,205

5.22%

5.51%

R 11,027

5.22%

5.51%

R 22,055

60 months

5.64%

6.31%

R 3,158

5.64%

6.31%

R15 792

5.64%

6.31%

R 31,584

Note: Nedbank also offers ‘Green Savings Bonds’ which are also deposits that are fixed over certain time periods from 18 months to 60 months and those rates are higher.

 

 

FNB

 

R10 000

R50 000

R100 000

 

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

12 months

6.50%

6.70%

R 670

6.50%

6.70%

R 3,349

6.50%

6.70%

R 6,697

24 months

6.90%

7.38%

R 1,384

6.90%

7.38%

R 6,921

6.90%

7.38%

R 13,843

36 months

7.40%

8.26%

R 2,147

7.40%

8.26%

R 10,734

7.40%

8.26%

R 21,467

48 months

7.75%

9.05%

R 2,960

7.75%

9.05%

R 14,801

7.75%

9.05%

R 29,602

60 months

8.00%

9.80%

R 3,828

8.00%

9.80%

R 19,141

8.00%

9.80%

R 38,282

 

 

Standard Bank

 

R10 000

R50 000

R100 000

 

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

12 months

6.45%

7.55%

R 755

6.45%

7.55%

R 3,775

7.55%

R 7,550

24 months

7.10%

8.30%

R 1,660

7.10%

8.30%

R 8,300

8.30%

R 16,600

36 months

7.55%

7.60%

R 2,280

7.55%

7.60%

R 11,400

9.14%

R 27,411

48 months

7.95%

8.45%

R 3,380

7.95%

8.45%

R 16,900

10.07%

R 40,264

60 months

8.45%

9.30%

R 4,650

8.45%

9.30%

R 23,250

11.00%

R 55,000

 

 

Investec

 

R10 000

R50 000

R100 000

 

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

Nominal Rate

Effective Rate

Interest at maturity

12 months

7.21%

7.45%

R 7,453

24 months

7.70%

7.98%

R 16,592

36 months

7.92%

8.21%

R 26,721

48 months

8.39%

8.72%

R 39,714

60 months

8.86%

9.23%

R 55,483

 

Note: In all cases these rates were quoted on October 26 and may be subject to change.

 

Please consider contributing as little as R20 in appreciation of our quality independent financial journalism.

AUTHOR PROFILE

COMMENTS   12

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

The rates quoted for FNB and Standard Bank are wrong. This is a very misleading practice by the banks and FNB and ABSA have done in the past. The actual annual effective rate on a 60 month deposit with FNB is only 8% and this is the rate that you must compare with the Capitec rate of 9,50%.

An nominal rate of 8% pa on an investment of R500,000 gives you an amount of R744,923 after 5 years. What they do is take this interest, divide it by 5 and then use this as the annual interest received. In the example then it is R244,923/5 = R48,984.60/500,000 = 9,80%.

The same applies for the Standard Bank rate.

This is very misleading and banks should actually be reported at the ombud for this practice.

It is fairly minor, but the accumulation of 500000 over 5 years at 8% nominal is 734664 not 744923. I agree that this practice of “calculate and divide by t” should be outlawed. It’s not only dishonest, it’s also lazy. No financial institution which is supposed to know something about compound interest should get away with this.

Hi Patrick

Could you please provide a link to the interest rates from Standard bank that offers the 7.55% for 12 months. I logged on to my internet banking (STD) account trying to open a fixed deposit account for the 7.55% and I could not see such an account. For 12 months period, the highest was 7.10% and even then it was for Electronic Senior Citizen and Consolidator Fixed Deposits.
The 7.55 % I found was for 36 months, refer [http://www.standardbank.co.za/standardbank/Personal/Fees,-rates-&-prices/Interest-rates/Fixed-Deposits]

It is a promotion they are running. You may have to go through the call centre, as that is the only place I was given that rate.

So what in theory could be happening is that the banks borrow from the Reserve Bank at the repo rate of 6.00% and lend at anything above 9.5% making a turn of 3.5% – greedy. In the other scenario they pay their customers 7.5% for their cash and again lend this money at 9.5% making a turn of 2% – again greedy. Also banks wanting to lock you into 12 month and longer investments merely gives them a bigger margin when interest rates start increasing – this is an old trick and has certainly been around since the early ’70’s when I was in banking

Why is this greedy? Surely you can do 3 things
1 – If it is truly greedy and highly profitable, you can invest in the banks instead of depositing the money and take advantage of this “greedy” practice
2 – You can open your own bank (regulatory hurdles understood). But as it is so profitable it should be a no brainer and you will find no problem attracting customers with higher yields on savings and lower yields on loans while still paying your operating costs
3 – Stuff the money under your mattress

Or, do you want government to step in and regulate the industry even more – as that is working great

All the rates stated above were quoted by the respective banks’ contact centres.

Never thought I would see the day, when an article on Moneyweb is punting bank deposits over investing in the markets, whatever happened to not panicking and bearing the brunt of short-term market volatility for superior long-term returns ?

It boils down to risk appetite I guess.
The fixed deposit story does sound rather compelling, particularly in times such as the current as it offers a safe haven for those seeking certainty above everything else, but I am a bit wary of being locked in a fixed deposit over a longer-term period, your money could be doing better elsewhere.

And the penalty fees, when you require a pre-maturity withdrawal are a real kick in the backside.

I wouldn’t say we’re punting fixed deposits ahead of investing in the markets. We are simply looking at the options. I certainly wouldn’t advise anyone to switch out of investments they already have unless they will be needing the money in the short term, but if you have money to invest now and you know you will need it at a specific time, cash is a pretty attractive asset class right now.

no RSA retail bonds mentioned , some income stability will over ride
both nominal & effective long term rates 8%, on 24 months compares well with bank rates …

Even though the nominal rates have been removed on a couple of the banks, it does not alter the fact that we are accustomed to quoted interest rates being compounded – normally yearly, sometimes monthly. The 11% “effective” for Standard over 5 years on 100000 is a simple interest function, which is fairly meaningless for comparison purposes. The nominal rate to return interest of 55000 is 9.161. If all the banks used simple interest to compute rand amounts of interest, it would be fine, as it’s apples against apples. But they don’t.

Thank you Patrick, very high quality article. Perhaps Moneyweb could consider including in its offering a “Best Interest Rates” indicator on its webpage available from all SA financial institution and also include the best 30-day fixed deposit offerings,

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / PODCASTS SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles: Advanced Search
Click a Company: