The European Central Bank (ECB) has been raising interest rates continuously for a year. For banks, this brings a windfall, they make an enormously good deal. Because instead of passing on most of the higher interest rates to their private customers, European financial institutions are raking in higher margins.
In 2022, they were able to increase their operating profits by 18 percent and sales by eight percent. This is the result of Strategy’s “Retail Banking Monitor 2023”.
Swiss banks made the most money: They made a profit of 426 euros per customer. This is followed by Belgium (361 euros) and Northern Europe with Denmark, Finland, Norway and Sweden (322 euros). Germany’s banks, on the other hand, only come in ninth place and, at EUR 201 per customer, are far less profitable than many of their competitors in other EU countries. Italy and Great Britain (189 euros) as well as the USA (172 euros) bring up the rear.
In addition to the interest margins, the savings programs of the banks, for example through the closure of branches, are also decisive for the average increase in profits. On average across Europe, banks have closed around 15 percent of their branches since 2021. Germany is exactly in this average.
The key interest rate in the euro zone is now four percent. The deposit rate at which banks can park their money with the ECB is 3.5 percent. While foreign direct banks now often offer three percent or more for overnight and fixed-term deposit interest, German savings banks and Volksbanks are particularly stingy. Often they don’t even pay one percent.
The Sparkasse Berlin, for example, offers customers 0.75 percent interest on overnight money, the Munich Volksbank one percent per year. The Frankfurter Sparkasse pays 1.10 percent for fixed-term deposits with an investment of 10,000 euros or more for three months. In other words, if you pay customers around 1 percent interest but park your money at the ECB for 3.5 percent, you get – to put it briefly – a 2.5 percent margin.
If you want to put money in a daily or fixed-term deposit account, you should therefore choose other banks. Customers can get an initial overview on various comparison portals and at Capital. The financial portal Biallo, for example, regularly lists offers. The Spanish Openbank, which belongs to the Santander Group, currently pays 3.7 percent overnight money. The Swedish TFBank with an even better credit rating promises 3.6 percent. The conditions for new customers are often better. However, numerous offers are limited in time, which is why bank customers should calculate carefully.
There is often even more to it with a fixed-term deposit: if you want to invest 25,000 euros for twelve months, you get 4.05 percent at the Italian Autobank, and 3.65 percent at the SBI Bank Frankfurt – the German branch of the State Bank of India.
