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Here’s how many billions the banks collect with the interest rate game. Reports

9 months ago babelfish

Here's how many billions the banks collect with the interest rate game. Reports

The accounts in the pockets of the banks on how much they collect between rates on loans and rates on current accounts and deposits. The study of Unimpresa

With zero interest rates on current accounts – and thanks to the increase in the cost of money – Italian banks collect, without lifting a finger, more than 26 billion euros a year, 76% more than a year ago, or extra revenues of over 11 billion.

This is the interest margin calculated as the difference between lending rates applied on approximately 670 billion in bank deposits remunerated with 0.32% and "used" in the form of loans to households and businesses, which in total amount to 1,312 billion, on which the average rate is equal to 4.25%: the difference between the "passive" rates recognized on deposits and the "lending" rates charged on loans guarantees the banks a "spread" of 393 points.

This is what the Unimpresa Study Center reports, explaining that if out of 100 euros deposited in a current account, banks pay the customer 32 euro cents, while out of 100 euros lent to a family or business they collect 4 euros and 25 cents.

UNIMPRESA'S COMMENT ON BANKING GAMES WITH RATES

«This differential is the result of the commercial policies of the country's credit institutions which take advantage, drawing a significant advantage, from the increase in the cost of money decided by the European Central Bank, recognizing very little, instead in terms of remuneration, to their customers. Without lifting a finger and without costs, banks collect tens of billions of euros. They take advantage of the wicked ECB policy which, as we have been denouncing for some time, not only does not produce the desired effects in terms of containing inflation, but is causing significant damage to the real economy, with a very negative impact on credit both in terms of higher interest rates and in terms of increasingly stringent access conditions», comments the vice president of Unimpresa, Giuseppe Spadafora.

THE TOTAL OF LOANS

According to the Unimpresa Study Center, total loans to households and businesses, as shown by Bank of Italy statistics, amount to 1,312 billion: the stock of loans to the private sector is kept up by various forms of bank funding and in particular by one part, i.e. around 669 billion, of the money deposited by customers in current accounts which in total is equal to 1,360 billion.

THE LOW RATES ON COLLECTION

In the last year, the rates on deposits have remained particularly low: if those offered by banks on time deposits or fixed-term deposits have progressively increased, those on "pure" liquidity parked in current accounts have risen by a few decimal places, from 0.02% in June 2022 to 0.32% last June: this is money that banks actually buy from their customers at very low prices and then resell it, in the form of loans, both to businesses and households, at an increasingly high, now reaching around 4.25% on average.

WHAT HAPPENS TO THE INTEREST MARGIN

It follows that the interest margin, on a very large volume of liquidity bought almost free of charge and resold at significantly higher prices, is enormous: in total, calculated in basis points, it is equal to 393 and it is this that generates, counting the 669 billion in funding used for loans, more than 26 billion a year of extra revenues, 76% more than a year ago, i.e. extra revenues equal to over 11 billion. «Although it seems legitimate to us that banks, which are not charitable works, should produce profit in order to create value for their shareholders, at the same time we would like to see less unscrupulous behavior and more attentive to the needs of the real economy in a still uncertain economic phase, despite two years of significant growth. On current accounts, as also requested by Italian and European institutions, more can and must be done towards customers», adds the vice president of Unimpresa.

RATES ON CURRENT ACCOUNTS AND DEPOSITS

Current account rates were 0.02% in June 2022, 0.03% in July and August, 0.05% in September, 0.06% in October, 0.09 in November and 0.12% in December. In January of this year they were reduced to 0.15%, then 0.18% in February, 0.21% in March, 0.22% in April, 0.25% in May and 0.32% in June. At the same time, the rates on time deposits with agreed maturity or term have reached over 3%.

LOAN RATES

As for loans, the rates for those granted to businesses averaged 1.74% in June 2022, 1.79% in July, 1.87% in August, 2.09% in September, 2.50% in October, 2.73% in November and 3.12% in December. In January of this year they were raised to 3.56%, then to 3.73% in February, 3.93% in March, 4.20% in April, 4.36% in May and 4.25% in June. Mortgages to households, on the other hand, were granted with average rates of 2.68% in June 2022, 2.71% in July, 2.76% in August, 2.85% in September, 3.07% in October, 3.18% in November and 3.27% in December. In January of this year they were brought down to 3.50%, then to 3.58% in February, 3.67% in March, 3.82% in April, 3.88% in May and an estimated 4.50% in June. According to Spadafora «on Thursday 27 July the ECB should bring the cost of money from the current 4.25% to 4.5%: we do not believe it is a heresy to expect the upward race to stop immediately, as the governor of the Bank of Italy Ignazio Visco also somehow hoped for, and not in September. President Lagarde listen to the voice of SMEs".

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ecco-quanti-miliardi-le-banche-incassano-col-giochetto-dei-tassi-report/ on Tue, 25 Jul 2023 09:32:55 +0000.