European banks losing customer deposits – S&P

Savers are hunting for greater returns amid rising benchmark interest rates across the continent

The vast majority of European banking giants reported a drop in deposits in the past 12 months as customers began searching for better savings deals, according to analysis released by S&P Global on Tuesday. 

The agency’s analysts say the fall reflects depositor efforts to find higher-yielding products to pay down increasingly expensive debt. 

According to the survey, the sample for which included banks from the UK and Norway as well as across the EU, total deposits at financial institutions in France, Germany, Spain, Italy, and the Benelux and Nordic regions saw a year-over-year decline of 3.9% to €21.675 trillion ($23.68 trillion) in the 12 months preceding June 2023. 

The experts added that the deposit drop was recorded in all markets, with Spain leading the way with a 9% decline. Two-thirds of the lenders included in a sample comprising 24 of Europe's largest banks reported decreases in deposits over the period with the biggest falls, by percentage, recorded at Sweden's Skandinaviska Enskilda Banken (13%) and UK's NatWest (12%). 

Customers are using deposits to pay down more expensive forms of debt, including mortgages, S&P said, citing Katie Murray, the CFO at NatWest, which had also noticed a clientele shift from non-interest-bearing accounts to term deposits. 

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The downward trend comes amid widespread hikes of benchmark interest rates across the continent as policymakers are struggling to tackle soaring inflation. Banking majors have faced criticism from regulators in several European markets including the UK for not raising savings rates as fast as the rates they charge on lending including mortgages. 

However, some banks managed to buck the trend in the April-June quarter, with 18 of the lenders in the S&P analysis reporting a quarter-on-quarter rise in deposits.

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