Banks are showing almost Spartan resistance when it comes to remunerating deposits. The first swords of the banks that have been presenting the results corresponding to the financial year 2022 (Bankinter, Banco Sabadell and BBVA) have indicated that it is not on the table to start paying for these products and prefer to offer their clients other products that, at their judgment, offer a greater benefit. “AlternativeLike deposits, we are offering products that seem much more interesting to us and that offer very attractive returns,” argued, for example, the CEO of Bankinter, María Dolores Dancausa.
Onur Genç also believes that there are other more attractive products for the retail customer, especially this year in which a recovery of the markets is expected. This reflection is paradoxical considering that families already have a trillion euros saved in deposits, the highest figure ever seen, and that the Euribor has closed at 3.3, although everything points to the reference index continuing to rise until reaching a range of between 3.75% and 4% in light of the rate hikes, at least two, that the European Central Bank (ECB) will undertake.
And it is that, the bank’s commitment is focused on offering investment funds, either fixed income or Spanish public debt funds, as Onur Genç admitted, given the furor that Treasury Bills are causing among retailers. Why is there this reluctance to remunerate deposits? Credit Suisse analysts find the key. For these experts, this rejection is intended to prevent the possible deterioration of Spanish bank commission income in 2023, which will affect basic income. And, they give Banco Sabadell as an example. “The beta deposit closed the year at 2% in Spain, but management sees it closer to 20-25% in 2023. Lower rates are expected in the quarter as a potential risk of clients changing their assets in time deposits when they offer higher performance.” Nor should we forget that Banco Sabadell, although it does not have deposits as such, offers an ‘online’ account with 2% remuneration for a maximum of 30,000 euros without requiring direct deposit of the payroll.
Furthermore, for the investment bank, unfavorable market dynamics continue to put pressure on service fees and asset management. Hence, the banks insist on offering funds, especially now that they expect a recovery in the markets, but with great volatility. To give an example, BBVA has registered income from commissions in 2022 of 5,353 million euros, 12.3% more, but in Spain they have registered a fall of 1.8% due to the poor evolution of the markets. For 2023, the reported guides reflect “some estimates in slightly higher estimates” (3% according to Renta 4 estimates).
Bankinter also suffered this decrease in commissions both in its asset management section and in its broker. In the case of Banco Sabadell, for 2023, the charges would register a decrease to low digits, also influenced by the commission reduction policy announced by the entity directed by César González-Bueno.
The turning point will be March
The European Central Bank (ECB) will have the key in the remuneration of deposits. As of next March, the regulator will stop buying debt at a rate of 15,000 million euros per month until June. That is to say, it will no longer reinvest the debt of its balance, within the objective that the institution has of gradually reducing it as interest rates rise.
This will be added to new returns of the TLTRO-III. In short, the ECB balance could be reduced by 15% throughout 2023 or, in other words, it would reach up to 50% of the euro area’s GDP, still above pre-pandemic levels, Caixabank Research explains. Despite this, it would cause an increase in the profitability of the sovereign debt of European countries and, with them, the rotation by banks of their ALCO portfolio would continue, exposure to this type of asset, and therefore an increase in its interest margin. But, on the contrary, financial institutions will enjoy less liquidity.
Upturn in remuneration in November of deposits
Despite this resistance, there are slight changes in the remuneration of deposits by financial institutions. According to data from the Bank of Spain, in November the average return on fixed-term deposits stood at 0.70%, which will practically double the 0.34% in October. Although it may seem low, it is a great improvement considering how deposit returns started the year, 0.04%. However, for terms between one and two years, the remuneration rises to 1.49%, while for a shorter period, interest is 0.49%.
