Deposit rates started to show signs of rising in Portugal, although they were still well below the European average. In October, the average return on deposits, the preferred savings instrument of Portuguese households, rose from 0.05% to 0.24%. This is the highest rate since November 2017 and represents the largest monthly increase since February 2012, according to data recently released by the Bank of Portugal. Yet, looking at the values offered by banks in the Eurozone, national banks pay about four times less and the fee is well below the rate of 1.975% of the three-month Euribor.
The ‘timid’ jump registered in October comes after the governor of Banco de Portugal left several warnings about the social function of banking and the duty to make this financial instrument, which has captured a large part of Portugal’s savings, attractive. as a way to control inflation. “The reflection of interest rate hikes must be felt in deposits, so that saving takes on a different meaning,” said the governor during a speech at the conference “The banking of the future”, organized by Jornal de Negócios.
Mário Centeno’s warnings come in a context where, despite the sharp rise in interest rates in Europe, which led to an increase in, for example, home loans, Portuguese banks have not reflected this trend in deposits, even among those with the lowest interest rates in Europe (less than 1% offer it). The rise in interest rates has already helped some banks improve the financial margin – the difference between what they pay on deposits and other financing and what they charge on loans – boosting the profits of the largest banking institutions by xxx% to xxx thousand have risen million in the first nine months of the year.
Looking at the data collected by the European Central Bank (ECB), Portugal is the fourth country with the lowest return on deposits (0.23%), surpassing only Greece, Cyprus and Slovenia. And the value is almost four times below the eurozone average: 0.83%. On the contrary, the Netherlands, France and Italy occupy the podium of the countries with the highest percentages: 1.88%, 1.46% and 1.37% respectively. When will Portuguese banks offer comparable values? Contacted by DN/Dinheiro Vivo, none of the five largest financial institutions wanted to commit to amounts or dates.
However, the low return on deposits has not prevented Portuguese households from investing their savings in this instrument, despite the fact that interest rates on savings certificates are more attractive. In October, the amount of new term deposits by individuals amounted to 4,726 million euros, an increase of 21% compared to the previous month and 38.6% compared to the same period of the previous year. Of the amount raised, EUR 4,205 million was invested in term deposits of up to 1 year. At the end of October, the total stock of deposits and equivalents in Portuguese banks exceeded €180 billion, a figure very close to the maximum.
Despite the improvement in deposit rates, they are still far below the remuneration of other more conservative investments, with a special emphasis on savings bonds. This product, which follows the Euribor rate at 3 months plus a 1% fee, pays a gross interest rate of 2.842% for December subscriptions. And they’ve attracted a lot of investment, increasing the value applied in this instrument
Incidentally, the improvement in the deposit rate coincides with the sharp rise in subscriptions to savings bonds and the gross interest rate for December was set at 2.842%, partly thanks to the increase in the Euribor 3 months. This state-owned product, which can be subscribed to in CTT branches or online, raised 1.4 billion euros in October.
Bank is not bound by data
One of the first banks to increase the savings fee was Caixa Geral de Depósitos (CGD) with the launch of a new instrument, as reported by Jornal Económico. This new product, called Depósito Pequeno Aforrador, focuses on small savings and was created “for those we really need to help save, especially at a time when the deteriorating cost of living requires more careful management of the family budget by the family side . these customers, where savings are an important complement to face emergencies,” said an official source from the public bank.
Regarding the forecast to broaden the rate hike to other products across the board, the same source said only that “CGD has been closely monitoring the process of normalization of the ECB’s monetary policy”. The entity led by Paulo Macedo also defended that “During the years of negative interest rates, Caixa has never failed to reimburse the savings entrusted by its customers” and “continues to do so, it is normal that in the long run the rates charged on products can revised upwards to follow the evolution of reference interest rates”. When? “However, it will be a gradual process and Caixa is assessing market conditions that will allow for this general revaluation of savings rates,” he added.
Novo Banco guarantees that “it closely follows the ECB’s monetary policy and, of course, the impact of the Central Bank’s more restrictive measures will be reflected in the deposit rate”. However, he warns that “the rise in interest rates to fight inflation can be curbed by measures that will make it possible to face a possible recession in the European area, which has already been foreseen”.
When asked if there could be new updates to savings products early next year, the institution led by Mark Bourke replied that “it is monitoring this issue and for prudential balance sheet management reasons these decisions cannot be made in the long term”. For these reasons, he explains that given the aforementioned recession, he cannot anticipate what will happen early next year.
BPI and BCP also preferred not to push data forward and Santander did not respond to any of the questions until the end of the edition. The bank owned by Caixabank did not provide any data on the possible increase in interest rates on deposits, only referring that “any change in current policy will be communicated in due course”. In turn, BCP said it “does not comment on issues related to its policies and business practices”.
Mortgage rates at their highest point in 2003
While banks are cautious about improving deposit returns, inflationary pressures and rising interest rates continue to feed into the rise in mortgage rates, indexed to Euribor. Since the vast majority of loans (around 90%) in Portugal are concluded on fixed-rate contracts, the impact on household monthly payments was significant.
According to data released by the Bank of Portugal on Friday, the average interest rate on new home loans has risen to 2.86% (2.23% in September), the highest since January 2015. statistical series, in 2003,” emphasizes the regulator.
The current economic context has cooled demand for home loans, which has reached peak after high in recent times. In October, banks issued 1.798 million euros in new loans to private individuals, 211 million euros less than in September. Of this total, 1197 million loans were for housing (-10.7% compared to the previous month), 412 million for consumption (-11.7%) and 189 million for other purposes (-6%).
Source: DN
