On the website of the Milanese Banco Progetto, its new savings account is promoted, Conto Progetto, which pays 2.5% APR for new clients. In two-year deposits, the bank comes to offer 3.6% per year. And in Spain? According to the latest data, corresponding to December, 0.04% was being paid in new sight accounts and 0.64% in deposits.
The Spanish banking industry is in the tail van in the remuneration of liabilities, with especially low remunerations. In the eurozone, an average of 70% more is paid, according to data from the European Central Bank (ECB)..
In the land of Banco Progetto, Italy, the average remuneration of deposits between 1 and 2 years was already 1.83% in November, in active operations (not in new operations). On the other hand, in Spain we were at 0.59%, which is pushing individuals to buy Treasury bills, which pay almost 3%.
This stinginess of the bank has two faces:
- For the bank customers It is a problem, since they are seeing how the prices of all kinds of products rise and how the mortgage becomes more expensive, while their savings barely grow.
- For who invest in banksOn the other hand, it is a good sign, because when these raise the remuneration of deposits, their margins are narrowed and they give lower profits.
Ricardo Seixas is responsible for the Iberian Stock Exchange at Bestinver, one of the most prestigious fund managers in Spain. “We are seeing how Spanish banks are having the capacity to continue maintaining a very low liability remuneration, even when interest rates are rising, something that does not happen in other countries. That implies better results and more dividends”.
The metric used to see the willingness to improve the remuneration of liabilities is called in the jargon “the beta of deposits”. According to calculations by the credit analysis firm Scope “Spanish banks are stressing that their deposit beta is in the 25-30% range.”
What does this mean? That when the Euribor was at 1% they could continue paying for deposits between 0.25% and 0.3% APR. AND Now that the reference mortgage index has exceeded 3%, they would pay at most between 0.75% and 0.9% for the liability.
Gone are, at least for now, the so-called liability wars. 11 years ago, the national entities fought for the money of the clients paying extra types. A good example is the Gasol Deposit, which was offered by Banco Popular through the basketball player Pau Gasol, and which came to pay 5% APR.
“The extratypes are products of another era. From a period in which Spanish financial institutions had liquidity problems, and one way to attract resources is by appealing to retail clients”, explains another Spanish fund manager.
It should be remembered that Banco Popular finished seized and awarded to Banco Santander for your rescue.
The fundamental business of banks is to raise money and then lend it with higher interest. The two main ways to obtain financing are the markets (debt issues and interbank markets), through the so-called wholesale financing.
The other route is current accounts and deposits, fixed-term deposits from clients. Between 2009 and 2012, widespread doubts about the solvency of the Spanish banking sector caused wholesale funding to slow down, or that it would become prohibitive. That’s why they had to turn to the clientele. The competition caused the remuneration of deposits to skyrocket.
The alternative of conservative funds
Managers. During the years of zero rates, banks have been offering their conservative clients the opportunity to achieve some profitability by investing in mixed-rate investment funds (which include some stocks) or in funds that invested in corporate debt. Now, with the rate hikes carried out by the ECB, pure fixed-income funds once again offer very attractive returns. According to a study carried out by Indexa Capital, a portfolio of funds concentrated in fixed income could expect an average annual return, in the long term, of 3.7%. While the return that the same portfolio could expect, a year ago, was only 0.6%. Now, the returns offered by conservative funds are a very clear alternative to deposits.
Now, things have changed a lot. After the collapse of a large part of the financial system, with the public bailout of savings banks and scandals such as the preferred shares, and the tightening of regulations on capital requirements, the solidity of the sector’s balance sheets has improved a lot.
Mónica Pina, head of the Raisin savings platform in Spain, explains that “for years, thanks to low official interest rates and other ECB measures, banks did not know what to do with excess liquidity. They even tried to reduce their deposit volume with negative interest rates and fees.”
Since last year, the ECB has ended a long period of zero rates, and has rapidly started to make the cost of money more expensive. But the bank had already hardened. This measure, for the moment, has done nothing but favor the financial industry, which It is entering much more thanks to the credits referenced to the Euriborwithout yet having to suffer almost nothing due to the increase in the cost of passive.
In addition, during the years of crossing the desert, with zero rates and narrow margins, Spanish banks learned to survive by refocusing the business on income from investment fund management and the sale of insurance. There is no rush to pay more for deposits.
Banco Santander added 38,600 million of interest margin, 9% more than the previous year. In his case, the customer differential improved from 2.41% to 2.51%.
This trend benefits all Spanish banks. At the height of the financial crisis in Spain, in 2012, the difference between the Euribor and what bank deposits paid on average was 1.6 percentage points. The passive was extratyped. Now he is undertyped. More than ever. The Euribor is 2.3 points higher than what deposits pay.
In addition, in the previous business cycle, banks also used deposits to attract customers. In recent years, on the other hand, the sector has opted to retain previous clients with cross-selling of investment funds, pension plans and insurance. Not with deposits.
One of the most striking elements of this matter is that clients, despite the poor returns on deposits, continue to have great confidence in this product. to december, the amount accumulated in fixed-term deposits and sight accounts exceeded one trillion eurossomething that had never happened before.
The asset management industry had been confident for a decade that, with zero rates, many clients would transfer part of their savings in deposits to conservative investment funds. But it was not like that. Or at least not as much as the sector thought. Year after year, the total volume of deposits of Spanish families has been growing non-stop.
Mónica Pina, from the Raisin platform, considers that in the end Spanish banks “will have to pay their liabilities better and, in fact, some smaller entities have already taken that step.” A phenomenon that for now is limited to the fintech and online banking segment, not to the large Spanish banks. This week, the Spanish bank Myinvestor (owned by the Andorran Andbank group) announced that it would pay a 2% APR for all contributions of up to 50,000 euros in its checking accounts.
In deposits, the best yield is now the 2.83% APR at 24 months offered by Renault Bank starting at 500 euros. Wizink offers 2.30% for 25 months, and EBN offers 2.40% APR for 36 months. BFF Bank even pays 2.27% APR on its deposits for six months and one year.
Now, after the big banks have presented the best results in their history, and when the price of money has just risen to 3%, it remains to be expected that someone will open hostilities and launch a groundbreaking deposit. According to the credit analysis firm S&P they have margin to spare.
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