2 stocks to buy as the big four banks drop deposit interest rates even further

Big four banks are cutting deposit interest rates by more than the RBA rate cuts. Yield investors should pick up stocks like Suncorp Group Ltd (ASX:SUN) and IOOF Holdings Limited (ASX:IFL).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Earning income for term deposit savers is getting even tougher. The big four banks are cutting deposit account interest rates by more than the RBA interest rate cuts.

Recently, the RBA lowered its cash target rate 0.25% to 2.25%, which would already affect fixed income investors and bank savers. On top of that, The Australian Financial Review reported the big four banks dropped deposit interest rates further, some as much as an extra 0.2%.

To see for myself, I jumped onto the websites of each of the four banks. For a term deposit of $50,000 for 60 months (5 years), the four banks offered the rates below-

Term Deposit Interest Rate
CBA 3.10%
ANZ 3.00%
Westpac 3.20%
NAB 3.00%

Usually you get the best rates for the longer terms. Still, those rates are low compared to some stock yields available right now.

As early as today, 7 April, the RBA may cut interest rates even more. Economic pressure coming from falling iron ore and oil prices may reduce expected corporate taxes and royalties for the federal budget. Will more interest rate cuts kick start the economy, or is it just buying time and breathing space? I guess we're going to find out.

The downward rate pressure will also push more of these bank savers to search out yield in the share market.

They will not only need relatively high yields but steady dividend payers. I would suggest the following stocks.

Suncorp Group Ltd (ASX: SUN) offers a whopping 6.1% fully franked yield and is reasonably priced for the expected growth. A big plus for the insurer and banker is its plans to return surplus capital to shareholders over the coming years. That could mean a continuation of special dividend payments along with regular dividend growth. The stock has pulled back from earlier highs, so it may be good time to add Suncorp to your portfolio.

IOOF Holdings Limited (ASX: IFL) also may give investors a good balance between growth and dividend income. The investment portfolio administrator provides various financial services for wealth management. The stock pays a 4.8% yield fully franked and is trading at 18 times forward earnings.  Analysts forecast both annual earnings and dividends to grow in the high single digits over the next few years. Dividends have been trending upward over the past five years, so investors can possibly look forward to continued income stability.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.  We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policyThis article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »