Northern Rock has £26m in deposits

British mortgage bank Northern Rock Plc., which made an aggressive entrance into the Republic's deposit market in November, says it has secured £26 million in Irish deposits to date. The bank has also announced plans to introduce a business deposit account to the Republic next month.

Domestic banks' and building societies' demand rates have not changed to a great degree since Northern Rock presented a 4 per cent interest rate deposit account on amounts of between £1,000 and £2 million. Only one competitor, Ulster Bank, made a short-lived attempt to respond to the invader by offering a 4.2 per cent demand rate. After scooping £60 million in deposits in five days Ulster Bank withdrew the account due to high demand.

In contrast, Northern Rock says it has taken in a more modest £26 million or almost 0.1 of a percentage point of the approximately £30 billion deposit market. The bank has said it hopes to secure 2 per cent of the Irish market in the longer term. In the UK, Northern Rock has 1.7 per cent of the deposit market, says director of marketing, Mr Andy Kuipers.

Prior to Northern Rock's entry into the market, demand account holders here were offered around 0.1 of a percentage point in interest and this was normally only paid on funds in excess of £3,000.

Customers of the Northern Rock's debut product, Direct Saver, lodge and withdraw money by post, telephone and via the Internet. Domestic institutions have argued that Northern Rock is not offering a traditional demand account, as it takes four days to obtain the funds, and therefore the product is not directly comparable with their rates.

Despite this assertion, the account's variable rate of 4.00 gross per annum (3.75 gross monthly) has proved most popular with savers in the 39-43 age bracket, although customers aged over 80 have deposited the highest average balances at £25,000 plus, says the bank.

The Direct Saver account guarantees that the rate offered will be at least 1 per cent above the European Central Bank (ECB) rate, currently 3 per cent, until January 1st, 2001. After this date, the rate will at least match the ECB rate until January 1st, 2002.

In February, Northern Rock is set to step up its challenge here with the launch of a business deposit account. The new product is expected to be a business savings account similar to the Direct Saver account.

Northern Rock executive director Mr Adam Applegarth said: "Increasingly Irish savers are taking advantage of new technology in making the new-style savings account a success. About one in five applications for the Direct Saver Account has come via the Internet since we opened for business in Dublin last November." This figure increases to one in three for those age 20-25, says Mr Kuipers.

Overall, Northern Rock's profits were up last year although it is still struggling to recoup funds lost to online competitors. For the year ended December 31st, 1999, the company reported underlying pre-tax profits up by 6.4 per cent to £230.2 million sterling. Assets increased by 13.6 per cent to £20.7 billion sterling.