Double interest rate margin
The fact that the interest rate margin in Greece has been double the European average supports the high profitability of the country’s four systemic banks, which in the first nine months of 2023 amounted to 2.8 billion euros out of a total of €131.1 billion which was the total profitability of the 109 systemic banks supervised by the Single Supervisory Mechanism (SSM) of the European Central Bank.
The interest margin in Greece amounted to 3.20% compared to 1.56% which is the average for European banks, with the lowest levels of interest margin displayed by banks in France (0.89%), Germany (1.13%), Belgium (1.51%) and the Netherlands (1.56%), while the interest margin in Portugal stood at 3.16% and in Spain at 2.63%.
This is confirmed by the data analysis carried out by the Hellenic Bank Association based on the consolidated data published by the SSM. The high interest margin – i.e. the difference between lending and deposit rates – in Greece is supported by the large deposit base of the four systemic banks in relation to lending, which allows Greek banks to keep interest rates on deposits low.
Total loans represent 59.2% of total deposits in Greek banks compared to 104.4% that is the corresponding percentage for European banks. This means local lenders have surplus deposits in relation to financing and therefore, as Minister of National Economy Kostis Hatzidakis recently stated, “they have no reason to offer higher interest rates to attract deposits.”
In addition, interest income represents 79.2% of the total operating income of Greek banks compared to 60.6% for the eurozone’s 109 systemic banks, which means that the main source of their income is interest. Conversely, commission income represents 16.3% of their total operating income compared to 28% for eurozone banks.
That percentage is increasing for Greek banks as in the corresponding period of 2020 it was 13.1% and the difference that exists with European banks supports the argument of Greek banks that they do not have high commissions.
