Loan and de­posit rates down, above eu­ro­zone aver­age

Financial Mirror (Cyprus) - - FRONT PAGE -

Fol­low­ing a drop by 10 ba­sis points (bps) in April, the in­ter­est rate on house­holds’ new time de­posits fell fur­ther by 18 bps 2.53% in May, ac­cord­ing to the Bank of Greece.

The year to date re­duc­tion stands at 30 bps, while the cur­rent rate is half the record high of 5% posted in June 2012.

Al­though with some de­lay and at a slower pace, the drop in time de­posit rates has fol­lowed that of T-Bill yields in 2014. In par­tic­u­lar, the yield for 3-month T-Bills has re­treated by 177 bps year to date to 2.13% in June. Sim­i­larly, the last 6-month T-Bill yield stood at 2.15%, mean­ing there was a re­duc­tion by 200 bps since the be­gin­ning of the year. Al­though the time de­posit rate is grad­u­ally fall­ing, it re­mains more than 100 bps above the re­spec­tive euro-area aver­age rate of 1.42% in May. In ad­di­tion, it is still higher than the re­spec­tive rates in Spain, Por­tu­gal and Italy, which range be­tween 1.4 and 1.8%.

On the loan front, af­ter a hike of the aver­age rate on new loans by 36 bps in April, there was a re­ver­sal in May with the aver­age loan rate con­tract­ing by 36 bps, thus fall­ing back to March lev­els.

The sharp drop in May is at­trib­uted to cor­po­rate loans above 1 mln eu­ros, where the rate nose­dived by 107 bps af­ter a sim­i­lar hike in April. As a re­sult, this spe­cific loan rate cur­rently stands at 5.57%, from 6.64% in April.

All other new lend­ing rates showed a small re­duc­tion to April lev­els. The most no­table month on month changes were in hous­ing loans (down by 9 bps to 2.94%) and in cor­po­rate loans up to 250,000 eu­ros (down by 19 bps to 6.49%).

The con­sumer loan rate eased by 6 bps to 14.80% and the rate of loans to sole pro­pri­etors also dropped by 5 bps to 9.07%

Al­though cor­po­rate lend­ing rates con­tracted in May, they re­main well above the euro area aver­age rates, by 3 per­cent­age points for loans above 250,000 eu­ros and by 2 per­cent­age points for lower amounts. In con­trast, the hous­ing loan rate is the only one that is still in line with that of the eu­ro­zone.

The re­spec­tive fig­ures for out­stand­ing (‘old’) loan and de­posit rates ex­hib­ited a much smoother fluc­tu­a­tion, with the aver­age de­posit rate eas­ing by 4 bps to 1.81%, while the aver­age loan rate in­creased by 3 bps to 5.62%.

As a re­sult, the aver­age spread on out­stand­ing vol­umes saw a mod­est rise for the fifth con­sec­u­tive month of 7 bps to 3.81%.

On the loan rate out­look, the Bank of Greece’s lat­est Mon­e­tary Pol­icy re­port sug­gests that Greek banks’ im­prov­ing liq­uid­ity as well as re­duced credit risk stem­ming from the an­tic­i­pated eco­nomic re­cov­ery may lead loan rates and spreads lower. This trend may be mit­i­gated by a re­vival of credit ex­pan­sion and banks’ pro­vi­sions against non-per­form­ing loans (NPLs).

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