Home » Banks, interest margin at the top. Prometeia: a decline expected in 2024

Banks, interest margin at the top. Prometeia: a decline expected in 2024

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Banks, interest margin at the top.  Prometeia: a decline expected in 2024

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The sensational leap in banks’ interest margins in 2023 is there for all to see: +45% is the average increase in revenues generated by institutions from one year to the next thanks to lending activity. What now remains to be understood is how 2024 will go. Because if it is true that the drop in rates could be slow to appear, thus prolonging the celebration for intermediaries, it is also true that funding could be affected by an increase in prices, thus reducing the gap of earnings. With what final outcomes?

The banks, to tell the truth, have no doubts: 2024 will still be characterized by a top interest margin, even admitting that the second half of the year, as expected, brings with it a contraction in interest rates interest. As announced by the bankers in the round of presentation of the 2023 accounts, at the end of the year the net interest margin on average is expected to be in line or even above that of 2023. Thanks, the banks underline, to a hedging activity that has already begun successfully and which will allow you to protect yourself from the inversion of the interest rate curve. And also an ability (unquestionable, to date) to keep the increase in funding costs to a minimum, particularly on the retail front, limiting the remuneration of deposits as much as possible.

Alarm bell

However, it is the consultancy firm Prometeia that rings the alarm bell and curbs the enthusiasm of the banks. Which, a little against the tide, puts less bullish forecasts on paper, thus inviting caution. «Net of the interest rate hedging measures by the banks, we estimate that 2024 will see a decline in the interest margin of 7% compared to 2023 – explains Lea Zicchino, senior partner responsible for analyzes of markets and intermediaries – because what will change will be the structure of the composition of the collection”.

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Much is due to what, according to the consultancy firm, promises to be a progressive and inevitable outflow of deposits towards other, better-paid areas. It must be said that up to now Italian banks, in line with other European banks, have in fact kept the level of remuneration of liquidity on current accounts low, which «only partially and only in the first part of 2023 has flowed towards other forms of investment ». This trend, according to intermediaries, should not change during 2024: if retail customers did not actually run away from current accounts when rates were rising sharply, bankers reason, it is not clear why things should change when rates they will start to go down.

Escape from bank accounts

In Prometeia’s projections, however, between now and 2026 the flight from current accounts will be significant: outflows of around 240 billion are expected, 100 of which will end up in time deposits, such as time deposit accounts, whose weight on the total collection in forecasts will increase from the current 7 to 12 percent. Part of the missing collection will then have to be replaced “with more issues and at higher costs on average”, so much so that the forecast is for an increase in the bond component from 11 to 14% in total, thanks to new issues for 50 billion. «And then the banks will have to deal with the competition from government bonds, given that public debt is expected to grow and will have to be financed in some way also by the savings of Italians».

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