Macro roundup: Bank margins
Greek borrowers see interest rates surge; depositors, less so
The effect in Greece of the European Central Bank’s current hawkish course on interest rates has been a spike in the difference between what Greek banks change to lend and the interest they in pay in deposits.
This much can be seen in data from the Bank of Greece this week, which shows the spread between new loans and deposits jumped to 4.96 percentage points in December from 4.83 percentage points the month before. The average lending rate on new loans was 5.06 percent, while average interest for new deposits was a mere 0.1 percent.
The gap between these two figures has only been larger in one other month in the central bank’s time series, which goes back to 2002.
The European Central Bank raised its policy rates by a further half a percentage point yesterday, bringing the rate at pays on bank reserve deposits to 2.5 percent, and said it will raise it again by the same amount in March.
So far, transmission of ECB policy in Greece has been swift in terms of raising the cost of borrowing, but minimal in terms of the interest depositors receive. This is not unique to Greece — similar trends can be read in the data for the eurozone as a whole, as interest rates for depositors follow the policy rate with more of a lag than those for borrowers.
The chart above compares the rates which banks pay to customers for customers for overnight deposits in Greece and the euro-area, as well as the weighted average of all deposits in Greece. What’s striking about it is the high rates offered by Greek banks a decade ago. Back then they were in desperate straights as deposits flew from the county and they offered high rates on term accounts to try to induce consumers to keep their money with them.
The liquidity situation of Greek banks has completely changes since the euro crisis, with deposits now a much less important part of their funding mix.
Greece’s unemployment rate was unchanged at 11.6 percent in December.
Retail sales increased 12.3 percent in November from a year earlier, up from an 8 percent rise in October. Volume grew only 0.9 percent in November showing that the increase in turnover was mostly from inflation.
The economic sentiment indicator for Greece improved to 104.9 in January from 103.5 the month before, with a sharp improvement coming from the retail sector. Consumer confidence was unchanged.
Greece’s manufacturing PMI rose to 49.2 in January from 47.2 in December. A reading below 50 indicates worsening operating conditions in the sector.
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Next week’s key releases
Friday, Feb. 10:
December industrial production (Elstat)
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Your posts serve as reminders/ heads-up for things announced, but not given enough attention/ thought. Thank you.
The throwback to early 2010's is...touching. The bankscape was different then, with 15 lenders or so, and the small ones indeed paid 5%-7% for term deposits. Later the system integrated and consolidated to 4-5 banks, and this wild-west competition ceased.