Superbowl Ads as Sell Signals

When I saw that an ad for E*Trade Bank had made Jeff Bercovici’s top six ads of the Superbowl, I thought I’d do a quick back-of-the-envelope calculation. The ad is for the E*Trade savings account, so I thought I’d take the cost of the ad and work out the number of extra accounts that E*Trade Bank would have to open in order for the ad to pay for itself, assuming that if the bank couldn’t open new savings accounts it would have to borrow at Libor.

But. Overnight Libor is at 3.24%, and the curve declines a little out to three months, where it’s 3.14%. All of which is much cheaper funding than the E*Trade Bank savings account, which currently pays 4.31%. So why on earth would E*Trade Bank spend millions of dollars on a Superbowl ad for the privilege of borrowing money at 4.31%, when it can borrow in the interbank market instead at much lower rates?

Well, maybe those fears of E*Trade Bank going bust haven’t gone away, and it no longer has access to the interbank market. Or maybe the super-high-interest savings account is a marketing gimmick, and when the Superbowl rush is over, the interest rate on it will quietly fall to something below Libor. Either way, the ad hardly gives me much confidence in E*Trade Bank, or in its parent, E*Trade Financial Corp. Which fell 4% today to $4.75 a share.

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