Mar 31, 2023
Europe’s Banks Lose Cheap Deposits as Savers Seek Higher Rates
(Bloomberg) -- European savers are increasingly moving their money from accounts that offer no or little interest to those that do, a shift that’s likely to cut into lenders’ income.
Bank clients pulled out of sight deposits in February at the fastest rate since European Central Bank records began in 2003, data published this week showed. Accounts with fixed maturities, meanwhile, attracted the biggest inflows in more than a decade in January and kept up that pace in February. European banks offer next to no interest on sight deposits while it can be as much as 2% for term deposits.
The rapid clip at which clients are shifting deposits indicates that the era of huge increases in income from lending may be peaking. Many European firms have reported their highest profits in years as rate increase by the ECB allowed them to charge more for loans while still paying little or nothing for deposits.
Read More: Banks Profit Like It’s 2007, Yet Rate Binge Won’t Last Forever
The difference between what banks pay for deposits and what they charge for loans is known as net interest income, and it’s been surging as a result. But as clients become aware that they can put their money to better work elsewhere, competition is forcing banks to pay up for deposits.
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