If there’s one thing Irish banks can always count on to boost their bottom lines, it’s the traditional inertia of households when it comes to finding better deals.
And nowhere is this more apparent at the moment than in how they are pricing customer deposits, at a time when Irish banks have tens of billions of euros of surplus cash stored with the Central Bank of Ireland – on behalf of the European Central Bank – and earning 3 per cent in interest.
Most household deposits in the banks are in current accounts, earning nothing. Figures out on Wednesday from the Central Bank show that the average rate on household overnight deposits, meanwhile, was just 0.03 per cent.
Irish banks, because they have higher deposit levels relative to loans than European peers thanks to inflows from Ulster Bank and KBC Bank Ireland as they retreat from the market here, have been among the laggards across the Continent in raising deposit rates since the ECB abandoned its negative rates strategy last July.
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While the average rate for households putting money into term deposit products has risen from almost zero last June to 1.02 per cent as of February, it remains 0.9 of a point below the euro-zone average.
Ronan Dunphy, an analyst with Goodbody Stockbrokers, said in a note to clients that the abundance of deposits in the Irish market “will continue to significantly constrain” the passing on of rising ECB rates to depositors in general.
But banks know that they can’t get away with this lark with corporate savers – a savvier bunch, many of whom have treasury management teams, who wouldn’t think twice about moving money oversees to make a better return.
The average rate for a new Irish term deposit on offer to corporates in February? Some 2.19 per cent, compared to minus 0.22 per cent last June, and just 0.12 points off the euro-area average.
