The profitability of deposits is influenced by a series of macroeconomic factors that determine their value. In this article, we make an overview of what we have in 2017 in terms of deposit returns as well as, for the more curious, a quarterly analysis of some of the most important financial events on the national scene.
Every 3 months, the new information is updated and analyzed to obtain a real evolution of the yields of the term bank deposits.
The analysis will be done as follows:
First, we take a picture of the general view of the profitability of deposits, observing trends and oscillations. Subsequently, we make a more detailed analysis of each quarter.
Influential factors in the profitability of deposits
The security and profitability of time deposits were the attributes that most determined the attractiveness of this product, but now the situation has changed.
The crisis that emerged in 2007 along with the monetary policy adopted by the European Central Bank (ECB), are the most influential factors in the decreasing trend of investment, by savers, in bank deposits.
At first, the crisis unleashed a chaotic panorama in which the national financial system hung in the balance. The investors did not trust the banks or the government because they felt like the direct recipients of the risk that was consolidating little by little throughout the territory.
The sources of bank financing were basically four:
- The interbank market
- The capital market
- The ECB
As a result of the crisis, the bank financing suffered a massive flight of depositors that, together with the increases in the financing costs by other banks, left as a clear financing channel the one coming from the ECB.
The monetary policy of the ECB and its actions in the economy are causing deposits to remain unattractive. The yields they yield are close to zero and it is due to the financing that the bank obtains through the ECB at an interest rate of 0%. It is no longer interesting for investors to deposit their savings in this product. In addition, Mario Draghi (president of the ECB) claims to remain in this situation until at least the end of 2017.
Profitability of fixed-term deposits, what is happening?
As we saw in the article the bank deposits exposed, within this product we have several types. One of the most used among investors are fixed-term deposits that are generally divided into:
- 1-year term deposit
- One-year deposit up to 2 years
- Time deposit over 2 years
Let’s see how the returns of time deposits of private investors or households and non-financial corporations have evolved, according to data from the Bank of Spain, so far this year:
The trend of returns has dropped, as predicted at the end of the first quarter. The main cause was the decision that the ECB took last March, imposing interest rates on banks for 0% financing.
The trend is also decreasing, the ECB’s policy of introducing such low rates means that deposit yields of non-financial corporations in time deposits fall.
The most outstanding case happens in the deposit between 1 and 2 years. The resounding drop in profitability makes it 0.09% when its profitability was 1.22% (according to data from the Bank of Spain).
Forecasts for the upcoming dates of yields of term deposits
The forecasts for the next dates regarding the monetary policy of the ECB, initially are not going to be modified. If this continues, the term deposit would remain an unattractive product for all those private investors who want to make their savings profitable.
If you want to know a little more quarter by quarter of the most important milestones that have influenced the profitability of this product for private investors, read the following section. Finally, we will propose an alternative that you can not miss if your purpose is to monetize your money safely.
Profitability of term deposits in 2017, quarter by quarter
The most current to oldest information is displayed so you can see the most updated before.
Profitability of fixed-term deposits in the second quarter of 2017
The second quarter of 2017 (April, May, June) begins with a decreasing trend carried over from previous decisions. In mid-April, the yields of the three types of time deposits pivot increasing. In addition, Mario Draghi announces that the fixed interest rates will be immovable as well as other additional actions such as the purchase of debt until at least the end of the year. The political uncertainty that finally resolves with the triumph of the Popular Party as well as the departure of England from the US (Brexit) influences the Spanish economic system as a consequence of being part of the European Union, in the financial markets and therefore in the banking and the products offered by it causing fluctuations in the profitability trend.
Profitability of fixed-term deposits in the first quarter of 2017
In the first quarter of 2017 (January, February, March), 1-year term deposits follow a growing trend, as do deposits with a term of 1 to 2 years but to a lesser extent. Unlike these two products, deposits over 2 years decrease as a result of the decline in profitability that they are offering. It is around 0.05%. Important events that are recorded in this quarter are:
- During the month of February of this quarter, there was a fall of the Ibex 35 of more than 15% in the year (month and a half), generating uncertainty in the investment in variable income. It is at this moment, when the profitability of term deposits increases, making savers consider this possibility of investment.
- An important event that will mark the profitability of deposits, takes place on March 10, 2017. On this day, the monetary policy of the ECB is modified by imposing a 0% interest rate on the financing offered to banks. To this financing, they access at zero cost. The mere intention of this decision of the ECB is to inject liquidity into the economy. The consequences of this milestone can be clearly observed when the April data is recorded, although the most likely scenario will be a fall in the contracting of deposits since banks do not need investors to deposit their savings in time deposits.
In addition, it must be added that all this takes place in a context in which the Euribor continues to fall and with it, the margins or profits and the interest rates of the banks as well.
With all this panorama, the question we ask ourselves is:
Are there more profitable alternatives to term deposit?
Crowdlending is a new method of financing and alternative investment, available to everyone. Its main objective is to create a line of financing based on a direct connection with investors seeking to access alternative yields to term deposits.
The product offered by these platforms for investors is the investment in the loans requested by companies in the amount that the investors themselves choose.
MytripleA offers the possibility of investing in loans guaranteed by SGR. It is the only platform that allows an investment with a security system very similar to that of deposits since the investment is guaranteed by the SGR, then the CERSA revamps and finally the IMF. In addition, these operations have associated an attractive return of 2% + Euribor. If you want to know more about your safety read our article Investment Security Guaranteed by SGR.
If you have more questions about how to invest in crowdlending, in this simple guide that we have prepared for you. In it, you can inform yourself and consult all your doubts.