According to an analysis released on Tuesday by S&P Global, the vast majority of European banking giants recorded a loss in deposits in the previous year as clients began looking for better savings solutions.
According to the agency’s analysts, the drop reflects depositors’ efforts to discover higher-yielding goods in order to pay down increasingly expensive debt.
Total deposits at financial institutions in France, Germany, Spain, Italy, and the Benelux and Nordic regions fell 3.9% year on year to €21.675 trillion ($23.68 trillion) in the 12 months preceding June 2023, according to the survey, whose sample included banks from the UK and Norway as well as across the EU.
According to the experts, the deposit drop was observed in all markets, with Spain leading the way with a 9% decrease. Two-thirds of the lenders in a sample of 24 of Europe’s leading banks reported losses in deposits over the period, with Skandinaviska Enskilda Banken in Sweden (13%) and NatWest in the United Kingdom (12%).
Customers are utilizing deposits to pay off more expensive types of debt, like as mortgages, according to S&P, citing Katie Murray, CFO at NatWest, which has also witnessed a movement in customers from non-interest-bearing accounts to term deposits.
The declining trend coincides with broad increases in benchmark interest rates throughout the continent, as governments struggle to combat growing inflation. Banks have been under fire from regulators in numerous European markets, particularly the United Kingdom, for not hiking savings rates as quickly as they have raised lending rates, including mortgage rates.
In the April-June quarter, however, some banks defied the trend, with 18 of the lenders in the S&P analysis reporting a quarter-on-quarter increase in deposits.
