European savers are withdrawing increasing amounts of money from banks in search of better savings options, while banks resist this to retain deposits.
The trend emerged when some of the largest European lenders reported a profitable start to the year, but at the same time, the phenomenon of ‘bank walk’ – a slow but significant outflow of cash from clients – continues.
Banks did not waste time when interest rates last year awoke from nearly 15 years of slumber and immediately began charging more for loans, but most delayed raising interest rates on deposits for millions of their clients.
This has led to many large banks exceeding the profit expectations of many analysts, which has made savers dissatisfied, thus raising new questions about the long-term stability of the sector.
At the same time, funds that collect small savings from citizens and invest them in the money market have proven popular among savers seeking higher returns on their money in conditions of high inflation. Recently, returns in these funds have slightly outperformed interest rates on bank deposits.
Higher Yield Alternatives
In the United Kingdom, NatWest clients withdrew £11.1 billion in the first three months of this year. HSBC deposits, excluding one-off inflows, fell by $10 billion to $1.6 trillion, while Barclays and Lloyds Banking Group recorded a decline in deposits of £5 billion and £2.2 billion, respectively.
In Germany, Bundesbank data showed that household deposits fell by nearly eight percent compared to the previous year. Deutsche Bank, the largest bank in the country, partially attributed its own decline of 4.7 percent in the first quarter to fears of the spreading banking crisis that began in the US and Switzerland.
However, Deutsche Bank’s Chief Financial Officer James von Moltke concluded that increased competition among “some price-sensitive deposits that were withdrawn from the bank” and some clients who switched to higher-yield alternatives such as money market funds also played a role.
French BNP Paribas also reported a modest decline in deposits in the first quarter, while Spanish Santander was the only European heavyweight to report a six percent increase in the same period.
Some lawmakers criticized banks for the mismatch between what they charge borrowers and the interest rates offered to savers.
