High street banks gain customers in Northern Rock fall

The UK's biggest high street banks have emerged as the chief winners from the Northern Rock crisis, as disgruntled former customers of the beleaguered bank seek a safe haven for their cash.

Barclays told The Times that it had seen an influx of millions of pounds in deposits since savers withdrew up to £2 billion from Northern Rock, while Lloyds TSB and Abbey have also seen a surge in savings accounts opened by disaffected former customers.

Nationwide, the UK's biggest building society, said that it had received sums approaching seven figures in deposits from new customers. National Savings and Investments (NS&I), the Government-backed savings institution, has also reported a sharp rise in the number of savings accounts opened with some individual deposits of up to £1 million.

Despite a guarantee from the Bank of England that money held in Northern Rock deposits is safe, Abbey has estimated that there is £57 billion up for grabs as investors seek a safe haven for their money.

A spokesperson for Barclays said: "We have seen a significant increase in the number of people opening savings accounts. Millions of pounds worth of savings deposits." A Nationwide spokesman said: "Some of our branches have seen a strong influx of funds from new customers in response to the situation with Northern Rock."

The deluge comes as high street banks, building societies and investment management companies try to capitalise on investor insecurity that has followed the recent credit crunch. Fidelity, the fund manager, yesterday began targeting cash depositors with money market funds, offering 6 per cent interest.

However, savings experts said that household name banks making millions from the Northern Rock fallout rarely offer the best value. Sue Hannums, of AWD Chase de Vere, the independent financial adviser, said: "Savers might want peace of mind, but they are sacrificing good returns. The best accounts from less mainstream banks offer up to 6.91 per cent with a Birmingham Midshires 11-month bond or 6.9 per cent on a one-year fixed rate from Anglo Irish Bank."

Barclays best savings account pays an interest rate of 5.39 per cent on an account with restrictions, while Abbey offers a maximum of 6.7 per cent on an eBond. NS&I offer rates on index-linked certificates for higher-rate taxpayers equivalent to 9.08 per cent tax-free and 6.3 per cent on their best-selling cash Isa, but offer poor rates on standard easy access accounts.

High rates are beginning to disappear as a result of a recent fall in the Libor, the inter-bank lending rate. Ms Hannums said: "Good rates are out there, but they won't last forever. If your money is under the mattress, now is a good time to get it out."

Source: The Times
Date: 27.09.2007 [101]