The four systemic banks in Greece have decided to reduce the interest rates on timed deposits, in an effort to increase their net profits from interest. The reduction on new timed deposits in the four systemic bank groups is between 1.6% and 1.9%, depending on the sum deposited for up to a year.
Should everything go ahead as planned and the domestic banking sector successfully overcomes the ECB’s upcoming stress tests, then the yields are expected to further shrink over the next six months. The banks aim to reduce the average annualized cost of fixed deposit accounts to 1.5% by the end of the first semester in 2015, compared to the current 2.28% rate.
This is the lowest yield since January 2010 and is 120 basis points less than a year ago and 54 since December. This reduction has helped the banks improve their interest rate margin, which is still below the goal set by the European Commission’s Directorate-General for Competition. According to the ECB’s latest data, the difference between the average interest rate of loans and deposits was 3.77% in July, up from 3.54% in December and 3.07% a year ago.
