worst of the credit crisis but are preparing for a domestic
slowdown dragged down by a wilting property market. The first sign
of this new competitive landscape is a rigorous fight for deposits
– the second may be market consolidation, especially between
mid-tier players. Rodrigo Amaral reports.
An all-out war for retail deposits has begun in earnest in Spain, a
market that has so far avoided the worst of the global financial
crisis but is experiencing the first pangs of a very nasty property
market downturn. A deluge of high-interest accounts has hit the
market, as well as accounts offering a range of gimmicks,
incentives and give-aways, as banks look to maximise retail funding
and acquire new customers.
Statistics released by AEB, the Spanish
Banking Association, show a number of players in the country have
already increased deposits this year. These include the Spanish
subsidiary of Barclays, which saw its total deposits increase 26.2
percent from January to July; Banco Sabadell, up more than 24
percent; and Banco Popular, which reported a 16.5 percent
increase.
At the end of last month, Banesto, one of
the two domestic banking brands owned by Santander, began offering
customers long-term deposit accounts that came with ‘free’
motorcycles and cars (see RBI 599).
Go deeper with GlobalData
Banesto’s Depósito sobre Ruedas, which
translates as ‘deposit on wheels’, comes with a range of different
vehicles depending on the size of the deposit: clients who deposit
at least €18,000 receive a Piaggio Fly 50 scooter; higher deposits
mean more sophisticated motorbikes. Those who deposit €160,000 or
more are offered a Citroën C4 car worth €19,500.
Interest paid upfront
The account from Banesto pays no interest
for three years, after which the rate is relatively small.
When a client leaves a branch with a
€14,000 Citroën C3 after making a €120,000 deposit, for instance,
they get 3.74 percent per year at the end of a 36-month period. But
the advantage, says the bank, is that the interest is paid upfront
(in the form of the car) while Banesto also takes care of the tax
bureaucracies and costs involved in purchasing a car.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataIn its third-quarter results, Banesto said
it had acquired almost 80,000 new clients in the three months to
the end of September, thanks in part to innovations like Depósito
sobre Ruedas, though managing director José García Cantera denied
the company is fighting a war for deposits in the Spanish market.
Banesto has been offering these sorts of deals for a long time –
some branches even sell consumer goods like televisions.
And other Spanish players are now also
looking at a similar marketing strategy. Barcelona-based saving
bank la Caixa remunerates depositors in its Depósito Estrella
product with video games, digital cameras, iPods and other
products. Banco Popular pays 4.75 percent in the form of an
espresso coffee maker for clients who keep €9,255 for 180 days in
one of its accounts.
The battle for deposits has intensified in
the wake of the Spanish government’s announcement it was increasing
bank deposit guarantees to €100,000 per customer. The government
has also set up a fund worth up to €50 billion to buy good quality
assets from banks to help with liquidity, and has said it will
guarantee up to €100 billion in new bank debt this year.
€44.8 billion of debts in
2008
According to Madrid-based consultancy
Tatum, Spain’s commercial and saving banks (known as cajas de
ahorro) have to find ways to refinance €44.8 billion of debts in
2008, a task made ever more difficult by the global paralysis of
the wholesale money markets. Next year, the situation could be even
worse, as the volume of debts will reach €75.7 billion. In 2010,
Tatum says the figure will be €71.1 billion.
And although the consultancy does not
expect commercial banks and the cajas to struggle to meet their
commitments over the remainder of 2008, it claims the “bloody” war
for new deposits is here to stay.
“The Spanish banking model is very much
[based on banks] attracting deposits to finance lending via their
significant networks of branches,” the consultancy states.
“In case the market turbulence persists,
[banks] can replace wholesale financing by these deposits, using
their proven commercial capacity to change product offerings.
Thanks to this peculiarity of Spanish banks and cajas, they already
fund around 80 percent of all credit with clients’ deposits.”
Tatum adds that while deposit rates
offered by Spanish banks tend to oscillate between 5 percent and 6
percent with small differences concerning the period of maturity of
deposits, banks are significantly upping rates to attract funds.
For instance:
• Unicaja’s Deposito Combinado 12 is a
structured product that guarantees 12 percent for two years for
half the money deposited, while the other half is paid according to
the performance of a basket of Spanish equities. The bank claims it
can earn up to 14 percent, a rate that some might consider
optimistic at the moment;
• Bankinter is paying 11 percent in the
first month for new online clients willing to save at least
€3,000;
• CAM’s Más por Más savings account
promises 7.5 percent for 12 months; and
• Banco Popular is paying a flat 6 percent
on its Deposito El Estiron account – as long as the money is
transferred from other banks.
More significantly, the fight for deposits
suggests the Spanish banking market will look to consolidate to
save costs, an
outcome intimated by Spanish prime minister, Jose Luis Rodriguez
Zapatero, on 15 October.
“During a serious crisis like this, it is
very likely that… you will see mergers or restructurings,”
Zapatero warned.
