Emigrant Savings Bank is Paying 3.50%

In case no one has noticed, Emigrant Savings in NYC recently raised the interest rate that they pay on deposits from 3.25% to 3.50%. Although Emigrant is small relative to the other NYC banks, it is interesting to see them price rates so aggressively in order to attract deposits. Over time, Emigrant’s move will force other area banks to raise their deposit rates, which means that they will also have to raise lending rates if they hope to still make money. In short, Bank of America, Chase, Citi and others big banks are going to lose depositor’s money to Emigrant (and a few others) if they do not increase their own rates. Once they increase their deposit rates from say 2.00% to 2.50%, they will have to also increase the amount they charge for a mortgage from 6.00% to 6.50% if they hope to maintain the same 400 basis point margin (which is called the net interest margin.)