State bank does well during crisis

A state-owned savings bank saw record levels of deposits during the final quarter of last year as consumers rushed to find a safe place for their cash amid a collapsing banking industry.

National Savings & Investments (NS&I) said it had seen £9.55 billion come in during the three months to the end of December, up from £5.67 billion during the previous quarter and £3.78 billion during the same period of 2007.

Since the beginning of the financial year in April, a total of £19.21 billion has been placed with the group, a huge increase on the £15.54 billion deposited throughout the whole of 2007/2008.

The bank's 100% Government guarantee put it well ahead of its rivals during a turbulent quarter for the banking industry which saw the collapse of US investment bank Lehman Brothers, the nationalisation of Bradford & Bingley and the announcement of plans by Lloyds TSB to take over Britain's biggest savings provider, HBOS.

Consumers confidence in the banking sector was further hit by the Government's announcement that it was to take stakes in Royal Bank of Scotland and Lloyds TSB.

The group's net finance forecast - the amount of money it raises for the Government - for 2008/2009 was revised from £4 billion to £11 billion at the time of the Pre Budget Report due to the bank's changing fortunes.

But steep cuts in the Bank of England base rate saw the amount of money the group saves the taxpayer, known as value add, turn negative during the quarter to minus £20 million.

NS&I said it had tried to strike a balance between the interests of its savers and those of the taxpayer when setting returns on its accounts during the final quarter.

The group has 27 million customers who have £94.89 billion saved with it, the equivalent of 12.8% of the national debt and 8.11% of the savings market.