2023-05-22 04:15:00
Spanish banks continue to generally slow down the impact of the rise in official interest rates on the remuneration of savings, although they are already there are a dozen entities –digital most of the time, some foreign, and with small market shares– that are offering returns close to or greater than 3% in term accounts. Some traditional groups have begun to join these operators. Caja Rural de Asturias began to raise the remuneration of deposits to its clients, although with rates somewhat lower than the Euribor and the profitability of Treasury bills. These moves anticipate a possible broader trend in the sector.
The Asturian credit cooperative predicts that next month could be a turning point in the sector, coinciding with the last term available to banks for the return of the bulky injections of liquidity received from the European Central Bank (ECB) to deal with the pandemic crisis. “The improvement in the remuneration of savings is going to arrive sooner or later in a general way,” he told this newspaper. Antonio Romero, CEO of Caja Rural de Asturias. “Between now and June there will be many more entities that begin to remunerate. It is a reality that we cannot deny,” said the manager.
The types. The Euribor, the index at which banks lend to each other, rose on Friday to 3.88% in the daily rate, its highest level so far this month. Waiting for how it closes in May (with a week to go, the monthly average is around 3.82%), the Euribor trend has been upward since January 2022, six months before the ECB began its monetary tightening policy in July of that year.
The current rise of the Euribor points to an anticipation of possible additional increases in the official rates by the ECB. Both his president, Christine Lagardeas its vice president, Luis de Guindos, left that possibility open last week. The supreme objective continues to be to subdue inflation. De Guindos ventured that there is still a long way to go in raising rates, although more stretch has already been done, he said, than the one that remains to be covered. The ECB’s main reference rate stood at 3.5% on March 16, compared to 0% at which it stood until July 21 of last year.
In comparative terms, the official rates are still low (they are at 2008 levels) and remain far from the double digits that they reached in the 1980s and 1990s. However, the speed and intensity of the rise in barely eight months has been of an aggressiveness with few precedents.
This abrupt and belligerent movement has not had a similar accompaniment in the profitability of time and sight accounts. The remuneration of individual savings for one year by banks has gone from 0.003% in last July to 1.36% in March, according to the latest data from the Bank of Spain. In the case of business balances, the revision has been somewhat more generous (from 0.11% it rose to 2.31%), but still less than other alternatives, such as Treasury bills, whose last three-month auction, on the 16th, it reached 3.061%, the highest level since November 2011, in the midst of the sovereign debt crisis.
Spain, at the tail. Spain is the sixth country in the euro area (after Cyprus, Slovenia, Portugal, Ireland and Greece) in which banks pay the least for their customers’ deposits. The 1.36% average remuneration in Spain for individuals is 35% lower than the area average (situated at 2.09%) and is less than half of what French banks pay (2.83%) and Italians (2.82%) to their depositors, according to the ECB.
For now, Spanish banks are putting priority on attracting payroll with gifts and rewards rather than remunerating the liabilities they already have. And clients who demand higher interest prefer to divert them to the subscription of investment funds, which generate the collection of commissions by the entities.
The causes of this delay in transferring the rise in rates to savers while it is being done to credits and loans is the search for an improvement in results – as, in fact, is happening – due to the interest margin. The bank is thus trying to recover the time lost in the recent pastwhen it had to face negative rates on its ECB deposits and it did not transfer this cost to households, although it did to companies.
The imminent return (in part it has already been done) of the enormous liquidity injected into the financial system by the ECB as a result of the pandemic with the so-called “long-term refinancing operations with a specific objective” (TLTRO) it will test the bank’s ability to continue without repaying the money that its clients lend it. Nevertheless, there are signs of a slowdown in the demand for credit due to the rise in interest rates and there is also a tightening of the conditions for granting new loans by entities for fear of an increase in delinquency if official rates continue to rise. Both phenomena, confirmed on the 3rd by the Bank of Spain, can alleviate the difficulty that the end of the TLTROs could entail for the sector, especially when family savings, far from falling due to inflation and the consequent decline in purchasing power , has increased 0.8% in interannual terms, up to 982,800 million in March, the last updated data, despite the fact that it has accumulated three consecutive months of decline since in December the money deposited by individuals in their bank accounts exceeded one trillion euros. euro.
The market is betting that an economic slowdown due to the rise in official rates will force central banks to stop the escalation and start cutting rates in the middle of next year..
The interest rate curve (especially that of the US) is inverted and the same occurs in Spain, although here in a much milder way: the debt yields 3.276% at six months and below (3.053%) at two years. So the banks try to hold out until then and avoid making their liabilities more expensive in the meantime.
The ECB has called on the banks to transfer the rise in rates to deposits because it is a necessary condition for the correct transmission of its monetary policy against inflation. Rewarding customers better would stimulate savings and discourage consumption, reducing domestic demand. And, at the same time, it would curb the current overdemand for Treasury bills, which would further encourage an increase in their profitability, as the ECB’s restrictive policy intends.
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