Easy for Top Banks to Make Money with Low CD Rates

This table shows the best CD rates for the five largest banks operating in the United States. These banks are Bank of America (BAC), JP Morgan Chase (JPM), Citibank (C), Wells Fargo Bank (WFC), and HSBC Bank North America (HBC).

CD rates (APY) at the largest US banks (Current Data) for a $10,000 deposit.

Bank	CD Rates - APY in % as of 9/24/09 for $10,000
	6- Mo	1-Yr	18-Mo	2-Yrs	3-Yrs	5-Yrs
Bank of America (BAC)	0.50	0.95	1.00	2.10	2.30	3.01
JP Morgan Chase (JPM) Bought WaMu -Washington Mutual	0.75	1.25	1.50	2.15	2.25	3.00
Citibank (C) aka Citigroup & Citicorp	0.75	1.49	1.73	1.98	2.23	3.44
Wells Fargo Bank (WFC) Bought Wachovia - World Savings	0.30	0.60	0.90 15-mo	1.40 20-mo	1.90 27-mo	NA
HSBC Bank North America (HBC) - Branch & Telephone Rates	0.25	0.55	0.55 15-mo	0.75	0.75	1.01
HSBC Online Rates	1.10	1.85	1.85 15-mo	1.60
US Treasury Rate	0.19	0.38	NA	0.93	1.44	2.36

To see the table in full size with the current rates, click the

• Best CD Rate Survey of the Top US Banks

Bankrate.com says the average thirty year fixed rate mortgage is 5.25%:

Product	Rate	Last week
30 yr fixed		5.25%	5.20%
15 yr fixed		4.67%	4.66%
5/1 ARM		4.29%	4.30%

Any idiot off the street should be able to make money running a bank that pays rates this low then lends money out for mortgages at over 5%.

One way to get four of the top five banks in a single investment is with the exchange traded fund XLF (XLF charts).

XLF Top Holdings % as of 8/31/09
J.P. Morgan Chase & Co. = 12.28
Bank of America Corporation = 11.01
Wells Fargo Company = 9.28
Goldman Sachs Group Inc. = 6.03
Citigroup Inc. = 4.11
% Assets in Top 5 Holdings = 42.70

Notes:

• Bank of America or BofA was "Nations Bank" before it bought Bank of America and took the name. BofA also bought Merrill Lynch officially as of January 1, 2009.
• JP Morgan Chase bought Washington Mutual, fondly known as "WaMu."
• Citibank is also known as Citigroup & Citicorp.
• Wells Fargo Bank bought Wachovia Bank - that bought World Savings Bank.
• HSBC Bank North America is the American subsidiary of UK-based HSBC Holdings plc. The Hong Kong and Shanghai Banking Corporation, also a subsidiary of HSBC Holdings, acquired a 51% shareholding in Marine Midland Bank of New York in 1980 and extended to full ownership in 1987. The banks continued to operate under the Marine Midland name until 1998, when the branch offices were rebranded as HSBC Bank USA.

Disclaimer: I own C (charts) and XLF (charts) in my personal account. I also cover C and XLF in my investment letter where I trade them around a core position currently in the money for both. I could sell all shares at any time to lock in my profits if my opinion sours on the sector as a whole.

Comments

[xcer:]

Sorry to hear you own Citibank shares, that share probably going to hurt the XLF

Sep 25 09:10 AM

[greedcanbgood:]

Too bad you don't understand how assets and liabilities are funded by banks. It's not as simple as CD rates versus 30-year motgage.

Sep 25 11:01 AM

[Kirk Lindstrom:]

On Sep 25 11:01 AM greedcanbgood wrote:
> Too bad you don't understand how assets and liabilities are funded > by banks. It's not as simple as CD rates versus 30-year motgage.

Too bad your manners and reading comprehension are equally lacking. I never said it was that simple.

Sep 25 12:08 PM

[Kirk Lindstrom:]

I've added this comment to the article on my blog:

"I used to get great CD rates at World Savings. World Savings was bought by Wachovia which continued to pay high rates to attract assets. Washington Mutual (WaMu) and Wachovia competed for deposits with each other by offering high rates.

To help save the banking system, the US eliminated some competition so the banks that are "too big to fail" can make money more easily. Wells Fargo, which had low rates all along, bought Wachovia. Likewise, Chase Bank bought WaMu. Now small savers have joined US taxpayers in bailing out the banks!"

Sep 25 12:10 PM

[jackooo:]

Taxpayers bail the banks out with zero interest to .5% loans. Taxpayers get 1% on savings accounts and 5 1/4% mortgages and .5% checking accounts.
Nice profit for banks with our own money.... lol lol
Well he promised you change not dollars.

Sep 25 01:41 PM

[greedcanbgood:]

Kirk - your data is good, but here is the quote, "Any idiot off the street should be able to make money running a bank that pays rates this low then lends money out for mortgages at over 5%."

You cite only mortgage rates and CD rates and your headline itself reads, "Easy for Top Banks to Make Money with Low CD Rates." What else is the reader supposed to infer about your comprehension as it applies to how banks fund assets and balance rate/volume on liabilities?

Sep 26 08:57 PM

[Jackson39:]

Exactly right greed.

The entire article is a quite simplistic view of bank funding and lending. And then to say that taxpayers are bailing out the banks because they are receiving low deposit interest rates again shows a lack of economic understanding.

On Sep 26 08:57 PM greedcanbgood wrote:

> Kirk - your data is good, but here is the quote, "Any idiot off the
> street should be able to make money running a bank that pays rates
> this low then lends money out for mortgages at over 5%."
>
> You cite only mortgage rates and CD rates and your headline itself
> reads, "Easy for Top Banks to Make Money with Low CD Rates." What
> else is the reader supposed to infer about your comprehension as
> it applies to how banks fund assets and balance rate/volume on liabilities?

Oct 12 07:34 PM