At the end of the season for the presentation of the quarterly results of the major Spanish banks, all have made it clear that there will be no installments to attract deposits, suggesting that the profitability of this product will continue to be unattractive, although he European Central Bank (ECB) announced a new increase in interest rates and all the heavyweights of the Ibex Bank that published quarterly figures last week –Santander bank, Bank Sabadell, caixabank and BBVA– take it for granted that the increases will continue until next summer.
All of them showed, to a greater or lesser extent, opposes the increase in deposit fees, which are at profitability levels close to zero. According to data from the Bank of Spain for the month of August, deposits on outstanding balances with a repayment period of more than two years are those that offer the highest return, with 0.26%, while the weighted average rate is 0.06%.
This situation is in contrast to the large savings that households deposited in financial institutions, which accumulate almost 1 billion euros ‘dead’ in current accounts and deposits. But it seems that financial entities are not willing to recover the compensation from the past –Ten years ago, outstanding deposit balances offered an average return of 2.694%-, although the ECB is somehow inviting them to do so by changing its monetary policy. Luis de Guindos, vice-president of the ECB, even urged customers to ask their financial institutions to return their money.
One of the clearest voices in this regard was that of the CEO of BBVA, Onur Genç, who recalled that during the last decade these products generated losses for banks because they had to deposit them with the ECB at negative rates, although they are now becoming profitable again. In his analysis, he pointed out that the price of deposits largely depends on the liquidity of the system, which is now “very high”so he does not believe that there will be pressure on these prices in the short term.
BBVA rules out that deposit fees are part of its commercial strategy, especially with high liquidity
“Despite the fact that the change in the terms of the TLTRO was announced yesterday, there is still a lot of liquidity in the system, so I don’t think this deposit war will happen,” he said this Friday. This was confirmed by the president of the BBVA Management Board they will not opt for that strategy of attracting new customers: “we will not go to that segment of deposits”, emphasizing that his strategy is based on “creating relationships with clients” through his digital model, “and not just that client who comes if I offer him a larger deposit”.
caixabank stands on a similar line. Your CEO, Gonzalo Gortazar, does not consider that deposits are the “best” of the savings instruments currently on the market. “There are other alternatives with better yields that can give a better result,” he said when presenting the results. Chief executive officer of the entity with the largest share of deposits in Spain (25%) believes that there are other more attractive instruments, such as fundsalthough he does not rule out product consolidation “as interest rates rise.”
For his part, the CEO of Banco Sabadell, César González-Buenopoints out that the fact that the cost of the asset grows more than the compensation of the liability is a consequence of the fact that “we come from an exceptional situation” which was forced to restructure, as “the banks’ liabilities cost 50 basis points and continued to provide services that charged less than their actual cost.” But now that he recognizes that the situation is improving, he did not dare to claim that he was the first to throw stone, because the moment one of the heavyweights in the sector ventures out, the wheel will start turning and the logical thing to do – given that the Spanish market is very competitive – is that the others will too.
No deposit, better investment funds
Santander bankwhose market share in Spain rises to 20% of deposits after the acquisition of Popular, is considered to have an excess of these in relation to loans “offers significant firepower” in the face of rising rates. Your CEO, Jose Antonio Alvarezbelieves that this compensation will “develop over time” and recalled that in recent years, while interest rates were negative, deposits with a short-term temporary perspective disappeared.
This situation would force entities to look for alternatives for their clients, and funds were established as a solution, which remains. Banco Santander, for example, has been offering money products for some time, which with a change in the outlook for interest rates would now offer returns of 2%. Gonzalo Gortázar, Chief Executive Officer of Caixabank, He highlighted them as an alternative for clients, even though the bank receives change. While reimbursing deposits requires them to pay interest, channeling money into funds benefits them by allowing them to receive management fees. Revenue that has been key to keeping earnings reports alive over the past few years and continued to strengthen its numbers through September.
Thus, during the first nine months of this year, large Spanish banks achieved a joint net profit of 16.014 million euros, data that improve by 32% its figure for the same period of the previous year. Santander leads this group with 7.316 million euros in accumulated annual profit, followed by BBVA, which earned 4.842 million by September. Behind them are Caixabank, with a profit of 2.457 million euros; Banco Sabadell, with 709 million; Bankinter, with a profit of 430 million and Unicaja, which closes the group with a positive result of 260 million.