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Fixed Deposits aka CDs

Started by quantakiran, October 07, 2018, 11:28:59 AM

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Hi guys

I want to open a fixed deposit (CD) at a local bank called Capitec. They are offering the best interest rates. I have a debit card account with them already and their service is amazing. They are currently one of South Africa's biggest banks but they've only been around for 18 years whereas the other guys have been around for forever.

At the beginning of the year, a "research" company called Viceroy released a report, fingering them for bad debts. Further, I read a comment on a news site about their inflated share price. When I checked, I was shocked to see their share price is nearly 10 times that of every other bank.

Barring Saambou, South African banks were (financially) well run if annoyingly greedy (I'm looking at you ABSA) machines; if they felt you couldn't afford a loan with them no matter how small, they didn't give you a loan. My folks struggled in the 90's to get a loan from the banks.

But the recent spate of banks collapsing (Mercantile Bank, African Bank and VBS) is making me worried. My research in the last year indicated that the other big banks may also be lending to people who have trouble paying back.

So now I'm on the fence about what to do. What documents should I look at to determine if this bank is on the brink of collapse or if my investment is safe?

In South Africa, the reserve bank was planning on guaranteeing deposits up to R100 000 but like everything else in this country, the wheels fell off and nothing more happened. For some reason I can't even open the reserve bank's site.

Any help/ideas would be appreciated.

P.S. Second runner up in the interest rates is Investec.


Does Citibank exist in South Africa? If so, I would go with them as an excellent international bank.

You shouldn't have to worry about losing your money opening up a deposit account. That's the exact opposite of why you are opening up a savings account!

What are the other international banks in your country?



Sam, if the bank goes belly up, the money is not guaranteed and you lose everything which is why I'm worried about investing in Capitec for a few grands more. But a few grands here covers the lights, water and telephone/data bill for the month which is why I'm even considering them and they offer compound interest.

So this is the list of banks we have, all with offices in Jhb only:
Bank of Baroda
Bank Of China Limited
Bank of India
Bank of Taiwan
BNP Paribas SA
Canara Bank
China Construction Bank Corporation
Citibank N.A.
Deutsche Bank
HSBC Bank plc
Icici Bank Limited
JPMorgan Chase Bank
Société Générale
Standard Chartered Bank
State Bank of India

I did look into these overseas banks but when I converted to dollars and back again, the amount of interest earned was ridiculously small. Though in hindsight I didn't account too much for depreciation of our currency.

I think it works better the other way around. If you're in the U.S., when you convert to a currency like ours, you get lots of money and then with our high(ish) interest rates, you earn more interest, so when you convert to dollars you get a decent return.

For example: R100 000 converts to $6734.81 @ 2.5% p.a. (interest rate in the U.S.) yields $168.37 which converts back to R2497
Whereas if I took $6736.81 converts to R100 000 @ 8% p.a. (interest rate in South Africa) yields R8000 which converts back to $539.53.

Because of our interest rate you're making about 4 times more than in the U.S., which would cover the 30% currency depreciation (rand vs. dollar).

I looked into India and Mauritius because our currency is marginally better than theirs but their interest rates are also quite low. I also looked into Singapore but they also have low interest rates.