The DKB has more than 5.3 million users.
(Photo: IMAGO/Lobeca)
Frankfurt In the competition for customer deposits, German financial institutions are stepping up the pace. Three days after ING Germany, the direct bank DKB also announced on Thursday that it would increase the interest rate on call money to 3.5 percent.
The offers of the two largest German online banks are each limited to six months. However, they differ in two main points: while ING only pays the 3.5 percent interest to customers who open an overnight money account with them for the first time, the interest rate at DKB applies to new and existing customers alike.
“We deliberately decide against unequal treatment,” said DKB manager Maren Heiss. With its initiative, the Berlin institute not only wants to attract new customers, but also to retain existing customers.
In addition, there is no limit to the investment amount with the DKB offer. ING, on the other hand, only pays the 3.5 percent interest up to a balance of 50,000 euros.
At the end of last year, ING had a good nine million customers, making it the market leader among online banks in Germany. The DKB is in second place with more than 5.3 million users. The BayernLB subsidiary conceded its original goal of reaching eight million customers by 2024 at the beginning of the year.
Willingness of customers to switch is increasing
Since the interest rate hike by the European Central Bank (ECB) in July 2022, banks no longer have to pay penalty interest when they park money at the central bank, but instead receive a credit themselves. The deposit rate that the ECB pays commercial banks is currently 3.5 percent.
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With a slight delay, the competition for insoles is now also becoming more intense. At the same time, the willingness of customers to switch is increasing, said ING private customer boss Daniel Llano on Monday at the Handelsblatt conference on the future of retail banking.
In recent months, the number of people who have searched for attractive interest offers and then switched banks has already increased, reported Llano. “I expect that we will see even more changes in the coming months.”
Against this background, numerous financial institutions have raised the interest rates they pay customers on their savings. However, ING and DKB are among the top group with their 3.5 percent offers.
The new DKB campaign, which has so far only paid one percent interest on overnight money, runs from August 1, 2023 to January 31, 2024. Customers will then receive the standard interest rate that will then apply, the amount of which has not yet been determined. New customers must open a current account with the DKB in addition to a call money account.
So far, banks have only passed on little interest
The percentage of central bank interest rates that banks pass on to their customers is called “deposit beta” in technical jargon. In the past few months, the “deposit beta” has risen across the industry – but not as much as originally calculated by many institutions. The increase is “continued to be lower than we had expected,” said Deutsche Bank CFO James von Moltke at an analysts’ conference in mid-June.
In the first quarter of 2023, Commerzbank passed on only 15 percent of central bank interest rates to its private and corporate customers. CFO Bettina Orlopp calculates with 35 percent in the next three quarters – and then with even higher values.
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“Historically, the ‘deposit beta’ was often between 35 and 45 percent, depending on the interest rate level,” Orlopp said recently. “There is no reason to assume that we will not reach this level this time.” Customers are just as well or even better educated than in the past.
In addition, thanks to digitization, it has become easier to move deposits from one bank to another. “From my point of view, the question is not whether we will reach this level again, but only how quickly,” said Orlopp.
According to a study by the Bundesbank, however, relatively little of the ECB’s series of interest rate hikes has so far reached customers. The central bank said in its latest monthly report that interest rates on deposits due on demand have risen only slightly so far.
Such a slower reaction by the banks could also be observed in earlier monetary policy tightening periods. “Since September 2022, however, interest rate pass-through has been even more sluggish than in the past.” Interest rates on savings deposits have also risen only to a small extent so far.
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