Banks are currently earning well because they already fully pass on the increased interest rates on loans, but still give very meager returns on deposits.
Looking at the conditions of the banks, it is striking that significantly more is paid for loans than last year, while savers are still fobbed off with meager interest rates. Specifically, the EU’s central bank recently raised its policy rate to 3.5 percent. And according to the latest figures from the National Bank, newly issued home loans cost almost the same in January, an average of 3.33 percent. On an annual basis, financing costs have almost tripled.
Banks make a lot of money
Savings deposits, on the other hand, averaged only 2.03 percent, even with a commitment period. Although that was also the highest level in ten years, it offers little consolation. However, the financial institutions earn a lot of money from this so-called interest margin. As early as 2022, they recorded a total of 22.5 percent higher operating profit, most of which came from the difference between interest on loans and interest on deposits.
That in itself is normal behavior. The fact that savings income is currently being picked up very slowly is also due to the fact that the banks have enough money and therefore do not have to tempt with interest rates, explains Gottfried Haber, Vice President of the National Bank. The strong increase in the cost of loans is in turn due to the fact that we have a particularly high share of loans with a variable interest rate, namely 45 percent. They rise automatically and immediately with the market level.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
