Courtesy of Mish.
Acts of Desperation
Looking for the next major thing in Spain to blow sky high? I have a strong candidate in mind.
Bank deposits are down 154 billion euros this year and banks have resorted to paying unsustainable interest rates as high as 8% to attract money.
Via Google translate from El Economista, please consider war rages over deposits: Spanish banks are “desperate”
A new war between Spanish banks deposits threatens to destroy their already depleted profit margins by offering higher interest to depositors to attract new customers in a desperate battle for scarce capital.
Entities found new ways to avoid legal restrictions and encourage customers to leave deposits to buy notes, products which are not protected by the Deposit Guarantee Fund.
Spain is in the spotlight of the debt crisis in the euro zone and many of its banks are unable to raise money in financial markets, forcing them to attract customers with deposits with annual rates above 4%, and that in some extreme cases reach 8% – a figure well above the average rates in the euro zone, amounting to 2.7% within two years.
“Self-destructive strategy’
“It’s a self-defeating strategy,” said a banking analyst in Madrid. “The margins are falling. When banks have to resort to such practices is because they are desperate,” he added.
Most Spanish banks offer more than 3% for new customers who deposit at least $ 3,000 for a year or more, although some entities like People or Ibercaja offer more than 4%. While banks need capital, rates are likely to continue rising.
“There will probably be an intensification of the war in deposits this quarter to post some good numbers at the end of the year”, said the chief executive of Bankinter, Maria Dolores Dancausa told analysts on a conference.
Depositors Beware!
“Superdepósitos” penalties were lifted in August and bank deposits have somewhat stabilized….
