Rise expected in deposit rates
US investment bank Jefferies predicts a further increase in interest rates on time deposits in Greece for 2024, favoring a shift from ordinary savings accounts to time deposits.
To date, Greek banks have on average raised interest rates on deposits by just 15%, compared to a eurozone average of 20%, and based on estimates this rate will increase by 50% within 2024.
However, the fact that Greek banks have a low loan-to-deposit ratio (between 60% and 70%) and therefore have excess liquidity, limiting the pressure to attract deposits, and thereby easing the pressure for any significant interest rate increases.
Based on November data, the average interest rate on term deposits for businesses has increased to 3.14%, while the average interest rate on term deposits for individuals is considerably lower, at 1.79%. Given, however, that the time deposits of businesses do not exceed 10.1 billion euros out of a total of €44.9 billion deposited in the sector, the pressure on banks remains low and explains the reduction of spreads in business loans observed in recent months. As far as households are concerned, term deposits amount to €36.5 billion out of a total of €143.6 billion deposited in banks – i.e. a quarter of total deposits.
According to banks’ estimates, the participation of term deposits in the total deposit mix will rise to 40% in 2024 from around 27% at the end of November, and the prospect of the higher pass-through of high interest rates for term deposits is expected to be contained.
As Jefferies observes: “Greek banks also benefit from the small balances that exist in deposit accounts (estimated to be €4,000 on average). These deposits are used for purely trading purposes and there is little incentive for customers to switch them to term, which helps to have a low pass-through of rate rises.”
However, the moderate increases in deposit rates favor the containment of loan interest spreads, which according to January-September 2023 data have decreased, despite the fact that the spreads between loans and deposits remain high.
