Banks are cutting interest rates on deposits

Banca Comerciala Romana (BCR), leader of the banking system in terms of assets, is preparing to cut interest rates on loans and deposits, and a decision will be made no sooner than the end of this month, company officials told Business Standard.

If, until April, there was a real battle on the banking market to attract savings, and lenders were offering huge interest rates, double or triple the inflation rate, now these same bankers are in a rush to cut yields offered on deposits, and the maximum reduction to date is two percentage points. BRD, Alpha Bank, Banca Transilvania, ING Bank, CEC Bank, OTP Bank, and Procredit Bank, as well as other lenders have entered this race.

Individuals benefitted from yields exceeding 16 percent for their savings until May, but now banks are rarely offering interest rates above 13 percent. Variable interest rates on one-month lei deposits fell to as little as 7.5 percent annually, even in the case of the market leader.

BCR is no longer willing to support rates on deposits at the levels registered in the past two-three months, in excess of 14 percent, respectively, as it is more interested in raising interest rates for deposits with longer maturities.

Bankers who are still waiting to see the movements on the market say that lenders that did not register satisfactory results in the first quarter will be the first to lower rates on deposits, because these involve high costs.

Almost one third of the banks cut their interest rates on lei-denominated deposits, following the decision by the National Bank of Romania (BNR) at the beginning of May to cut the key rate by 0.5 percentage points. Some lenders chose steeper reductions, as in the case of BRD-SocGen, that cut interest rates on lei-denominated deposits by up to 1.75 percentage points, down to an annual 11-12 percent, while others, such as Banca Transilvania, opted for a small-step policy, operating four cuts over two months.

Business Standard