Frankfurt In the competition for customers, the Internet bank ING Germany increases interest rates on money overnight. With this, the bank wants to win new customers. But even those who already have an overnight deposit account with ING will now earn three per cent on new deposits for six months.
According to the comparison portal Verivox, ING is the market leader. In no other German bank do depositors receive such high interest rates.
Oliver Mayer, managing director of Verivox Finanzvergleich, expects: “The new proposal is likely to increase competition for investors’ savings.” As Germany’s largest direct bank, ING is also an important benchmark for many other market participants, which competitors use to determine their own terms.
Following an interest rate hike by the European Central Bank (ECB) in July 2022, banks will no longer have to pay a penalty if they keep money at the central bank, but will instead earn money from it. Interest on deposits that the ECB pays to commercial banks is currently three percent. Some economists expect the central bank to continue raising interest rates.
Therefore, it is possible to make money with deposits again, and more and more financial institutions are raising interest rates. Banks are trying to attract especially new customers with particularly high interest rates. The head of ING Germany, Nick Jue, also said that by raising the rate, the bank confirms its growth ambitions.
On average, banks pay only 0.27 percent
In addition, banks aim to ensure that the growth of deposits corresponds to the growth of lending. Even if the financial business in Germany collapsed, financial institutions are likely to arm themselves with additional deposits to revive demand for loans.
However, the difference between the ECB deposit rate and the money-to-call rate often remains large. According to Verivox, the average interest rate is currently 0.27 percent. Here, the data came from 674 credit institutions that show the offer of money overnight, which can be freely accessed on their website.
>>Read here, why inflation plays such an important role in setting interest rates.
In Verivox’s most recent assessment, conducted at the end of March, 39 percent of banks paid no interest at all on pre-call money. A month earlier, the share of credit institutions without overnight interest was 55 percent – including a particularly large number of savings banks and national banks. You benefit from loyal customers who are not too quick to respond to offers with high interest rates.
Three in front of the decimal point is not the case with money for calls for a long time. Spanish direct bank Suresse was recently the first financial institution to use the brand, according to consumer portal Biallo.
There, the offer applies only to new customers and is limited to four months. From the fifth month, it is “still above the average” of 1.75 percent per year, Byala said.
Given the ECB’s negative deposit rates for several years, excess deposits sometimes cost banks money. Many credit institutions responded by demanding negative interest rates from customers with higher deposits. These penalty rates often apply to a tax-free amount of €100,000 or €500,000.
ING’s interest is limited, but also for existing customers
ING Germany, which previously attracted customers with relatively high savings rates under the name ING Diba, increasingly relied on domestic bank customers. In the best case, such customers not only save money, but also receive income through mortgage lending, consumer credit or savings in securities.
At ING, three percent is now available on new call accounts for deposits of up to €50,000 from the time the money is received within six months. Existing customers get a higher interest rate for every new euro deposit before April 25 – also up to a maximum of €50,000.
Behind ING’s new terms is also an ambitious target: after falling profits last year, the direct bank is once again aiming for much higher customer growth. “At today’s interest rate, any growth is profitable,” CEO Jue said in early February. “That’s why the old goal is back: ten million private customers, but now by 2025.”
Jue had already published this target shortly after taking office on June 1, 2017, but later dropped it due to low and negative interest rates. At the end of 2022, ING Germany had just over 9.1 million customers.
more: According to the survey, the ECB should raise interest rates, despite the turbulence in the banks
With dpa material
First published: 04/05/2023, 08:26 (last updated: 04/05/2023, 16:08).