Rich Savers Take Another Hit in Denmark
Sydbank A/S has targeted its richest depositors and announced it will impose negative interest rates on large retail accounts.
(Bloomberg) --
A second Danish bank has targeted its richest depositors and announced it will impose negative interest rates on large retail accounts.
Sydbank A/S, Denmark’s third-biggest listed bank, will follow Jyske Bank A/S and place a rate of minus 0.6% on retail deposits larger than 7.5 million kroner ($1.1 million). Chief Executive Officer Karen Frosig says the impact on profits will be limited, but the step is necessary.
“In this environment we’re in now, it will be harder and harder to earn money,” Frosig said in an interview. “It ought to trigger some consolidation, but we haven’t seen it yet.”
The Cost of Negative Rates:
Sydbank published results on Wednesday, reporting second-quarter total income that missed analyst estimates. The bank repeated its forecast of shrinking revenue in 2019 and said that it now expects its full-year net income to come in at the lower end of its previously guided range. Read more here
Sydbank shares fell as much as 13% in Copenhagen. The stock is down by more than a third this year and has been the target of short-selling by hedge funds.
Banks in Denmark have had to deal with negative rates for longer than their European competitors, after the nation’s central bank first cut its benchmark rate below zero in mid-2012. The industry had so far tried to resist sharing the pain of plunging rates with retail customers for fear of losing business. But recently, the Danish Bankers’ Association said seven years of negative rates are taking their toll. It wants policy makers to take steps to alleviate the pain.
Jyske said earlier this month it will impose a negative rate of 0.6% on deposits exceeding 7.5 million if no other agreement is reached with clients. The bank’s chief executive officer, Anders Dam, said at the time he’s girding for another eight years of rates below zero.
Other Nordic banks have so far balked at the idea of charging retail depositors. Danske Bank A/S is holding out: Denmark’s biggest bank guaranteed clients that it won’t follow suit. At Swedbank AB, Sweden’s biggest mortgage lender, spokeswoman Unni Jerndal says there are no plans to introduce negative rates for private clients. “Our floor is zero,” she said earlier this month.
Elsewhere in Europe, banks are increasingly passing on the pain. UBS Group AG and Credit Suisse Group AG have taken similar steps to Jyske and Sydbank with their wealthiest depositors.
The Danish Bankers’ Association has said the central bank ought to look into expanding a facility that allows banks to park excess cash at a 0% rate. The so-called current-account facility currently limits such deposits to a little over 30 billion kroner for the whole industry.
To contact the reporters on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net;Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net
To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net
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