Hunting for the final deposit at a 3% interest rate: decreased rates impact profitability.

Less than two years have passed since the European Central Bank (ECB) decided to raise interest rates for the first time in almost a decade, and we are already seeing a decrease in savings returns. Christine Lagarde, the president of the ECB, recently announced the first reduction in official rates, lowering the deposit rate from 4% to 3.75%. This rate represents the money that banks receive for depositing their liquidity in the Bank of Frankfurt, but it is far from the real profitability that small savers are currently seeing in Spain.

In July 2022, the so-called war for passive income, initiated by Emilio Botín in 2010, resurfaced in public opinion. However, large entities are not expected to enter this game again, as they do not need liquidity and have already been burdened with a decade of unproductive money on their balance sheets. Spain’s deposit profitability peaked in December of last year at 2.58%, which is below the European average and that of other large economies. Currently, households hold around 150,000 million euros in time deposits, while companies hold 67,000 million euros.

The market is becoming less optimistic about future interest rate cuts in Spain, with only a maximum of two more cuts expected in the upcoming quarters. This relief would mainly benefit mortgage holders. Digital neobanks in Spain are currently offering deposits with returns exceeding 3%, attracting clients with competitive rates. Trade Republic was one of the first neobanks to lower its current account remuneration to 3.75% following the ECB’s rate cut. In contrast, traditional banks like Deutsche Bank are also offering competitive rates on short-term deposits.

In this competitive landscape, digital banks like WiZink, MyInvestor, and EBN are offering attractive deposit rates above 3%, with varying terms and conditions. The ongoing trend of digital innovation in banking is reshaping the savings and investment landscape in Spain, offering customers new opportunities to earn competitive returns on their savings.