The fall in interest rates on ROL deposits is continuing: two of Romania's largest banks yesterday announced new cuts by between two and three percentage points only days after previous adjustments.
The new average interest rate on the market is now repositioning at around 10% a year, compared with 12% a year a week ago and against an inflation forecast of 7.5%.
CEC (The Savings Bank), the only bank specialised in savings which also manages one third of the total amounts of money deposited by individuals in the banking system, yesterday cut three points off its interest rate for one month deposits bringing it to 9% a year. The move comes two days after making another two percent cut. Their rate for one-year deposits is down to 8%, one of the lowest levels on the market. CEC, as the only bank benefiting from the full guarantee of the state for the attracted deposits, does not seem interested in maintaining its attractiveness by using interest rates. At the end of 2004, CEC was managing deposits worth some 1.1bn euros, around 33% of the total deposits in the banking system.
CEC is now the first major retail bank to push interest rates below the 10% per annum threshold. According to some estimates, annual inflation was close to 10% in February, compared with 8.9% at the end of January.
Raiffeisen, the third leading bank on the market, yesterday cut its rates by two percent for all interest paid in respect of deposits by individual customers. Its new rates range between 10% for one month and 10.5% for up to one year. This comes after a previous cut one week before.
Ahead of the game again was ABN Amro with rates ranging between 6.75% and 7.25%, followed by ING with 6-7% and HVB with around 8%. ING, however, pays 11.5% per year for current account amounts part of its main retail product, Cont'ROL. On the other hand, ABN Amro pays 6% on money in its sight accounts, which is much higher than the market average.
At the end of January 2005, individuals had more than 131,000bn ROL (some 3.4bn euros) in deposits, NBR data show, up 38% from the same time in the previous year. Deposits witnessed solid growth in January of 5% despite modest interest rate decreases.
It remains to be seen how appetite for savings will develop given that banking customers are now learning that term deposits are no longer a way to make gains and only preserve the value of the money over time at best. Even more drastic were the declines in interest rates for corporate customers, with CEC paying 8% a year as of today and Raiffeisen 8.5%.
BCR and BRD, currently the top two banks on the market, have kept their rates above 11% per year for both types of clients.
The large drops in rates on deposits represent the price being paid by customers for the rate cuts on the ROL loans that averaged up to 20%. The banks are not willing to give up their over 10% spreads between interest paid and interest charged and as such did not think twice before cutting into what they offer on savings, even using costs for the minimal compulsory
reserves required by the NBR as justification.
razvan.voican@zf.ro
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