The increase in interest rates led banks to a surge in interest income, which was supported by an increase in loans, but mainly by an increase in spreads, i.e., the difference between interest rates on loans and deposits. The widening of spreads is due to the fact that banks moved to increase lending rates faster and to a greater extent than deposit rates, which grew, but at a slower pace.

To this end, the average interest margin on new loans in our country expanded further at the end of March to 5.50% from 5.24% at the end of January, and the average margin on the portfolio of existing loans increased over the same period to 5.43% from 5. .21%. Thus, the gap between the cost of borrowing and the return on deposits is widening. Characteristically, according to the data of the Bank of England, the average interest rate on all deposits, i.e. both savings and term loans increased by just 11 basis points from 0.12% in January to 0.23% in March, while over the same period the average interest rate on all loans increased by 37 basis points from 5. 36% to 5.73%. As K wrote, Greek banks recorded in 2022 the third place in the Eurozone among European banks in terms of net interest margin, which, according to SSM, amounted to 2.14%.

An analysis released yesterday by the Hellenic Association of Banks notes that low deposit margins are the result of low interest rates on savings deposits, in contrast to interest rates on term deposits, which have risen in recent months. According to EET, the average interest rate on time deposits up to 1 year for March was 1.16% for households and 1.47% for businesses, while the corresponding savings bank interest rate is 0.03%, and the interest rate for current accounts 0.10% respectively. Thus, the weighted average interest rate is affected by low interest rates on so-called first demand accounts, the pricing of which, according to EET, “should not be taken into account in the calculation.”

It should be noted that according to the ECB, the average interest rate on savings accounts in the Eurozone in March was also at a low level, namely at the level of 0.15%, while the interest rate on term deposits up to one year for the population was 2.09% . (compared to 1.16% in our country), while for enterprises the interest rate on current accounts was 0.41% and on time deposits 2.56% (against 1.47% in our country). According to EET data, for durations of more than 1 year, the interest rate in our country reached 1.83% (from 1.04% in December 2022), and on average in the euro area for time deposits for individuals over 1 year, they amounted to 2.16% .

In terms of loans, the EET analysis focuses on the cost of home loans, finding that for loans with a term of 5 to 10 years, the interest rate in Greece fell by 7 basis points to 3.50% in March, when the average interest rate for loans in the same category mortgages in the euro area, it was 3.56% compared to 1.54% a year ago (March 2022). The interest rate on total household loans in March decreased by 4 basis points in Greece to 3.79%, while in the Eurozone it increased by 13 basis points to 3.37% compared to 1.47% a year ago (March 2022).

EET notes that “the rest of the eurozone countries started to raise interest rates on time deposits earlier due to the negative interest rates they have introduced for almost three years. At the same time, they have also begun raising new personal loan interest rates from the beginning of 2022, with an overall increase of around 200 bps compared to 105 bps in Greece.”

It should be noted that the EET data does not consider the evolution of interest rates on business loans, where the discrepancy between Greek and European interest rates remains significant, as it even exceeds 200 basis points in some categories. In particular, the average interest rate on new loans up to 250,000 euros was set in our country in March at 6.91%, when the corresponding average interest rate in the euro area was 4.70%, and the average interest rate on business loans from 250,000 to 1 euro. million euros, respectively, has developed in our country at the level of 5.83% compared to 4.33% in the euro area, following the upward trend of recent months.

Equally important is the discrepancy between Greek and European interest rates on outstanding balances of business loans, a category for which ECB data show that the costs of servicing businesses range from 5.39% to 5.78%, compared to 2.70% to 4.09% in the Eurozone. The large widening in spreads recorded by the Central Bank, whose data includes all categories of loans, not just loans to households, is also explained by the large divergence in borrowing costs for businesses between Greece and the eurozone.